Double Short Bund : to play the long-term cycle of rising rates? (DSB) – 05/07/17

We integrate into our Watchlist the ETF Lyxor DSB (Double Short Bund index listed in euro) whose objective is to provide the daily inverse x2 performance of a German government 10 years bonds portfolio. Expenses related to the ETF are rather low at around 0.2%.

  • DSB seems attractive in the current context of sentiment of change in the ECB monetary policy. We believe that the tapering (and thus lower bond) soon start a long-term cycle of rising rates, while the downside potential is very low.
  • DSB looks at the very beginning of a new bullish trend, which will correspond to an improvement of European growth and a gradual reflation from falling unemployment (Germany now has an ambition of full employment) and consequently wage increases later on.
  • The weekly chart shows a downward trend that is coming to an end. The 13 and 26 EMA are not far from a crossover, while the MACD has just given a positive signal. However, a confirmation is needed through the EMA effective crossover the breakout of the €38 level.

DSB charts, weekly data :