DE10Y Retraces March Gap Risk

19 thg 10, 2020

As yields continue to push lower across both sides of the Atlantic technical trigger points project a break out of range. Fundamental interpretation from ECB's Lagarde's recent commentary in a interview on OCT 15 gives room for the implication that could see "cheaper yields, and richer bonds in the interim".

Lagarde stated the following "Rebound is uneven across sectors and regions; financial risks in EZ remain elevated; banks currently have sufficiently robust capital and liquidity buffers; headline inflation likely to remain negatives over the coming months, turning positive in 2021; stand ready to adjust all instruments"

Technicals remain triggered here as long as we remain below the ECB deposit rate. If we retain above -61bps and push the -50 figure catalysts such as election, EURIBOR, and future central bank policy changes could trigger a break back toward the -45 handle. Continuation through monthly closing range coupled with EURO ZONE negative yield pricing across the peripherals I'd be looking for a test of all time lows. Once a correction completes, we would look for a potential reversal back through levels not seen since EUR credit crisis.