Bunds’ historic move warns of similar move elsewhere

Movement in Eurozone sovereign yields especially the volatility in German bunds warn of similar movement in similar crowded trades in other asset class. Chart courtesy Morgan Stanley and Bloomberg via Mike Bird.

• According to data compile by Morgan Stanly, 30 year bund's move in last week reached highest level in 20 years. Bund's movement has wiped out all the gains made since this year and as of now European Central Bank's monetary policy has not depressed yields. Current volatility is making it difficult for the traders to take positional view on bund, which is moving in heavy intraday swings.

Some of the heavy one sided trade has given some sort of correction, while others continue to hover at critical levels.

• Euro has given significant correction of around 900 points, however remains at high risk moving upward sharply against dollar if yields across Euro zone rise sharply. Euro is currently trading at 1.114.
  
  
• Dollar has given some correction of around 6% from its high, however still remains heavily one sided trade and remains at risk should US economy fails to gather pace. Dollar index is trading at 95.08, up 0.28% today.
  
  
• US stocks - US stocks are hovering close to their all-time high and has not given any significant correction since last September. With FED rate hike looming ahead risks are high that stocks might falter heavily.
  
  
• Japanese stocks - Since Bank of Japan (BOJ) introduced quantitative easing in 2012, Nikkei has rallied from 9000 to 20000. Nikkei closed at 19620, up 1.25% today. With further stimulus hope fades and economy keeps struggling Nikkei remains at high risk.