FxWirePro: German 10-year bund might face rapid decline if breaks below 162.5

German bund and the bonds made news in early September when they dropped sharply leading to a rise in the yields. On 8th of September, German 10-year bund declined from 168.3 to 164.6 by the closing of the day leading to a major risk aversion in the market. Bunds have bounced back since but really didn’t get back their mojo yet. After bottoming at 162.55 area, it has bounced back to 165.8 but is declining once more, leading to a rise in the yield.

Many believe that the central banks’ asset purchases have led to the formation of a bubble in the government market and the current prices remain very high. Such notion makes selling bund at these levels attractive, as a matter of fact very attractive.

The bund is currently trading at 164.6 and if it breaks below the previous low around 162.5, we might see further rapid decline towards sub 160 and 155.