What Moves German Bund Futures Contracts on the Eurex?

The German 10-year Bund futures contract traded on the Eurex futures and options exchange in Frankfurt became the world's most actively traded derivative product by the end of 1999. In this article, we provide a detailed exploration of the interday and intraday return volatility in the Bund futures contract using a sample of five-min returns from 1997 to 1998. The evolution of interday volatility is described best by a MA(1)-fractionally integrated process that allows for the long-memory features. At the intraday level, we find that macroeconomic announcements from both Germany and the U.S. are an important source of volatility. Among the various German announcements, we identify the IFO industry survey of business climate, industrial production (preliminary), and Bundesbank policy meeting as being by far the most important. The three most significant U.S. announcements include the employment report, the National Association of Purchasing Managers (NAPM) survey, and employment costs. Overall, U.S. macroeconomic announcements have a far greater impact on the Bund futures market than their German counterparts.