Yield Plunge Implications for Cyclical Performance

This year’s steady decline in French and German 10-year bond yields accelerated this week, with French OATs making new all-time lows:

France (1.60%)
image

Germany (1.26%)
image

image

Whether prompted by a lack of confidence in the ECB’s announcement of various supportive measures earlier this month, unimpressed by less than encouraging data out of the region, or spooked by geopolitical tensions, the move lower has negative implications for the performance of European cyclicals:

image
image

Weakness in cyclical sector momentum so far this year would appear to be at risk of further deterioration:

image

image

image

image