Everybody talks about the imploding yields scenario these days. The move lower in yields is simply amazing. Inflation is gone, growth is gone, and we are all looking at Japanification as the future scenario.
The move lower in yields has been so strong, so a possible bounce would not be surprising, but recall what most “smart” guys are saying these days, yields are lower for longer, and many now expect US yields to catch up to the global implosion.
German 10-year yield continues lower and is causing problems for among others the financial sector.
Names like DBK are not being helped by imploding yields. DBK is somewhat of a special “case” these days as the company is trying to “survive” and exit some of the “nontraditional” banking areas.
UniCredit, one of the bigger players, delivered a rather gloomy outlook yesterday. The stock is down to big support levels, but this is just another casualty of the imploding yields topic.
Where yields will go forward nobody knows, but it is interesting to see how even the longer maturities have now joined the implosion scenario. Below is the German 10- and 30-year yields.
Lately the bid for longer term bonds, such as Austrian 100-year bonds, have gone totally parabolic. Shorting parabolic moves is an art itself, but we are a bit confused by the sudden surge in chasing that long dated bonds.
At this stage we are only watching, but any sharp bounce, or sharp continuation of the current trend, will create opportunities, and among the most sensitive sectors, we will watch the EU banks.
Source, charts by Tradingview