3 weeks ago MI2 Partners published an interesting report on Austria’s 100-year bond. They noted that this summer’s bond rally was awe-inspiring as negative convexity sucked in every last buyer on the planet. Nowhere more so than in Europe, where asset-liability rules forced pension managers and insurance companies to chase the move, pushing duration exposure in sovereigns to record highs. The poster child of this rally was the Austria’s 2.1% 100yr, which was issued back in September 2017. MI2 argued that while it might have looked like an amazing investment (price doubled in 9-months), the problem was that it had left a chart pattern that at face value had all the components of a “classic bubble”, i.e. four phases; stealth, discovery, mania, bust, bear/bull traps, a 35-45 degree trendline, a parabolic move and neckline. 3 weeks ago that trendline was holding, but if it did break, then things could get very interesting, wrote MI2 at the time. Well, the trendline has just broken, say MI2, in an updated note published today, and the move appears to be extending, they say. From a technical perspective, they now have a minimum target of 143.5 for the 100-year Austrian bond, the new report says, which raises two questions. How far can long-dated European duration fall, and could European Govvies unwind the entire rally? Such a move would take this bond back down to its long-term trend line and in the process, take global bond markets down with them, the MI2 report concludes.