BMO Research Canadian Strategy Snapshot Yield Sector Relief as Rates Moderate Bottom Line Under the backdrop of the first Bank of Canada rate cut and moderating long-term interest rates, we believe that the core defensive yield sectors, like Communication Services, Real Estate, and Utilities should be doing much better. In fact, these are three of the worst performing sectors year to date and all three of these sectors are posting year-over-year relative price performance below one-standard deviation of average. Additionally, our work shows that Communication Services and Real Estate are currently the two deepest value sectors in the TSX. As such, we believe the fears surrounding these sectors are likely overdone, especially as we believe the easing rate environment should begin to lift concerns around yield, elevated capex spending, and debt levels. Indeed, when we look at longer-term interest rates, our work shows these sectors should be performing much better. Since the April low in GoC 10-year yields, only Utilities have outperformed, while both Communication Services and Real Estate have continued to lag. Overall, we believe the easing rate environment should ultimately provide relief for these underperforming sectors in the second half of the year. We remain overweight Communication Services, a sector we believe is currently the most oversold contrarian sector in the TSX. Although we remain Market Weight Real Estate, we believe this is another key contrarian sector with significant room to outperform in the near term as rates moderate. While we do NOT consider Utilities to be a key contrarian sector, we remain Market Weight and believe the sector still offers good relative value and will continue to benefit from the current easing environment.