Gavekal Capital: Yield Plunge Implications for Cyclical Performance

Friday, June 27, 2014

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%)

Germany (1.26%)

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:

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

About Gavekal Capital

Gavekal Capital is a US registered investment advisory firm that manages the Gavekal Knowledge Leaders Strategy. Knowledge Leaders are a group of the world’s leading innovators with deep reservoirs of intangible capital. These companies often possess competitive advantages such as strong brand, proprietary knowledge or a unique distribution mechanism. Knowledge Leaders are largely service-based and advanced manufacturing businesses, often operating globally. Gavekal Capital seeks to identify the world’s leading knowledge companies through a proprietary process that analyzes corporate knowledge investments.
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