Bond Technical Strategy Weekly by Lloyds TSB

Volatility reigns supreme at the moment. The unwinding of the commodity bubble has been a key underpinning of the short end of the bond markets, but investors’ concerns are still evident as you move further down the curve.

Volatility reigns supreme at the moment. The unwinding of the commodity bubble has been a key underpinning of the short end of the bond markets, but investors’ concerns are still evident as you move further down the curve. The volatility (large swings with a lack of trend) in the price charts continue to reflect the prospects that commodity prices may well be approaching significant lows as investors expectations move towards deflation. Only time will tell how
this will pan out, but the relatively high level of indecision reflected in the 10-30 year area for core bonds is understandable. The clearest buy signal in the longer end is evident in the bund chart. This is likely to be supported by the widening of various european bond spreads against Germany which could well accelerate over the coming weeks.

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