Europe Capital Partners flags wide carry cushion gap across European 10-year bonds
TLT•Europe Capital Partners flagged wide differences in carry cushions for 10-year European government bonds under a 1% yield shock. A 1% yield drop implied roughly 10%–13% 12-month returns, while a 1% rise cut returns by 1%–4% in most markets.
1. Carry cushions vary
Europe Capital Partners’ analysis found that a 1% rise in yields would cut returns by 1%–4% in most markets, with losses of 1.2% for UK Gilts and 1.9% for French OATs. German Bunds were down 3.8% and Swiss bonds 7.8%, while the analysis said carry offsets broad rate rises but not country-specific credit shocks and called for selective duration exposure across Europe.
