German Bund Yields Drop to Record Lows: Enjoy It While It Lasts

Home > Interest Rates
German Bund Yields Drop to Record Lows: Enjoy It While It Lasts
Can you apply a method like Elliott to forecasting bonds?

By Vadim Pokhlebkin
Mon, 07 May 2012 21:15:00 ET

Get investable insights sent to your inbox at least once a week – for free. Challenge the way you think about investing with The EWI Independent.

Privacy

Bonds are a stepchild of the financial news world. Stocks, forex, energy, commodities -- all those markets get their spotlight many times a day on financial TV and in other media. Bonds, not so much.

Bonds are complicated. For starters, there are lots of different bonds: Treasury, sovereign, agency, municipal, corporate; high-grade and high-yield (a.k.a. junk), etc. Then you have bond prices and bond yields; when one goes up, the other one goes down… Now multiply that across a dozen different nations. There is a lot going on. Can you even apply a method like Elliott to forecasting bonds?

In a word, yes. Our Short Term Update gives a forecast for U.S. Treasuries three times a week; has done it for years. And our Interest Rates Specialty Service has been covering global bond markets for about two decades now. Let's talk about it.

On Monday morning, a news story flashed across the financial headlines:

"German Yields Drop to Record Lows After French, Greek Votes" (Bloomberg, May 7).

When yields fall, bond prices rise. (Bonds are so-called "fixed-income" investments, meaning that they guarantee you a certain return. Prices rise to compensate bondholders for the losses from a drop in yields, and vice versa.) The question is, could you have predicted a drop in German bond yields using Elliott?

Here's a forecast for German Bund prices that our Interest Rates Specialty Service posted on Friday, May 4 -- before the French and Greek weekend elections. (Some of the Elliott wave chart labels have been erased for this article.)

Bunds (Intraday)

Posted On: May 4 2012 10:22AM ET / May 4 2012 2:22PM GMT

Last Price: 142.10

May 04 2012, 10:22 AM ET The advance is on track to move within the 142.22/61 area, and the ideal, wave (3) target remains at 142.61 firm, Fibonacci resistance. The focus is up over the balance of the day against 141.75.

This bullish forecast for German Bund prices implied a move to lower yields.

Now, to be sure, this was one of several record-low yield instances for German Bunds over the past few weeks. The point of this article is to simply show you that bond prices exhibit the same Elliott wave pattern as any other liquid market, which makes them probabilistically predictable using Elliott.

And what about going forward? Well, Elliott wave patterns for Bunds suggest that Germany should enjoy the low yields while they last.

You will find details in the Weekly and Monthly section of our Interest Rates Specialty Service >>

To Trade Bonds like a Pro, Get the Same Forecasting Service That the Pros Use

Trading bonds is no longer just for big institutions. Internet trading has put them within reach of every trader and investor.

That means opportunities in global interest rates are now accessible to you, too... if you have the tools to take advantage of them.

Our Interest Rates Specialty Service is a powerful tool that can have a huge impact on your trading success.

You get intensive interest rate coverage for the time frames and regions that you need. You choose: intraday or long-term, U.S. or Europe, or even Asia. Interest Rates Specialty Service delivers the professional-grade forecasts and analysis you need to help your trading decisions.

Give your bond trading the boost that only an institutional-strength service can deliver.

Learn more about EWI's Interest Rates Specialty Service >>

Tags: Bear market, debt, diversification, Elliott wave, Elliott Wave trading, europe, European debt crisis, eurozone, Interest Rates, safe haven, trade targets, U.S. Treasuries

May 13-16

Las Vegas Money Show

July 10-13

Freedom Fest Conference

Stay Ahead of the Trend in U.S. Stocks

EWI's Financial Forecast Service equips you to think, trade and invest independently from the crowd. Here's what you'll get, risk-free:

Short Term Update -- Intensive forecasts and analysis3x/week for U.S. stocks, gold, silver, bonds and the U.S. dollar.
Financial Forecast -- In-depth,intermediate-term perspective on U.S. stocks, gold, silver, bonds and the U.S. dollar.
Theorist -- Bob Prechter's monthly big-picture insights.

Put the Financial Forecast Service on your screen in minutes, risk-free>>

Most Read

Highest Rated

The Next Major Disaster?

Is a Major Disaster Developing for Bond Holders?

Prechter warned investors about looming destruction in tech stocks, real estate, blue chips and commodities -- all at a time when conventional wisdom considered them safe. This 10-page report is a must-read report if you have money in mutual funds, Treasury bonds, municipal bonds or high-yield bonds.
Download your free 10-page report

Interest Rates

CLOSE [ X ]

The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific Elliott wave patterns in price movements. Each pattern has implications regarding the position of the market within its overall progression, past, present and future. The purpose of Elliott Wave International’s market-oriented publications is to outline the progress of markets in terms of the Wave Principle and to educate interested parties in the successful application of the Wave Principle. While a course of conduct regarding investments can be formulated from such application of the Wave Principle, at no time will Elliott Wave International make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Investing carries risk of losses, and trading futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds. Information provided by Elliott Wave International is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions.