Falling German Yields Continue to Weigh on Cyclicals

Excepting the slightly higher rates at the long end of the curve over the last month, German yields have generally continued lower over the last year.

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While German’s 10-year benchmark bund flirts with support of its 200-day moving average…

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We are particularly wary of the potential effects on interest-rate sensitive, cyclical European equities (especially those belonging to the late cyclicals group of Energy, Industrials, and Materials sectors). As rates have steadily fallen since 2008, these late cyclicals have gone from outperforming the MSCI World Index by nearly 70% to down more than 10%–and making new relative lows–over the last decade.

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