QUESTION: Mr. Armstrong; Do you agree with Bloomberg that the yield on German bunds has declined in anticipation of the Fed lowering rates?
ANSWER: No The falling yields on German government debt is simply intensifying the trade to buy German and short everything in the South in anticipation of a failed Euro. Also, there has been tremendous concern about the European banking system as a whole. It really a stretch to claim yields are declining in Germany because the expect lower rates at the Fed. This is purely a speculative punter’s play – not a shift in strategic portfolios. Italy’s budget battle with Brussels remains a concern as is the case with BREXIT. There is just a growing lack of confidence in Europe. I do not believe that even the technical pattern implies such a shift at the Federal Reserve as the reason for capital movement within the Eurozone market.