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Fasdal: What's driving German bund yields up

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When there’s turmoil in the markets, such as the on-going uncertainty over Greece, German bund yields should fall. That's because investors head for a risk-off strategy, buying bonds and selling riskier assets. But at the moment German yields are rising. 

Saxo’s Simon Fasdal explains some of the reasons why including the move back towards inflation. He also says that the end game over Greece is in sight, with the market now expecting a solution to be found.

He also explains the reasons behind the big sell-off in German bunds. Firstly, the 'duration' theme which saw fund managers buying extra long bonds to cope with falling yields. Now that yields have spiked upwards, some of the positions have been unwound. Fasdal says this has led to a lack of liquidity.

This isn't what the ECB had planned so Simon anticipates that Mario Draghi will try to stabilise the bond market. This will be verbal but he thinks that in the future there could be a plan to renegotiate the size of the QE programme so that it becomes more aggressive.