Global Short Duration strategy - April 2021
- 02 June 2021 (5 min read)
Credit spreads tightened as government bond yields stabilised
- Credit spreads were tighter, supported by the gradual reopening of economies and lower US treasury yields
- The US Federal Reserve (Fed) continued to dismiss talk about early tapering of quantitative easing
- The risk profile was further reduced
What’s happening?
Despite concerns about spikes in COVID-19 infections in a number of key countries, credit spreads still tightened, supported by the gradual reopening of economies, positive economic data, and strong earnings results.
The US Federal Reserve (Fed) left policy unchanged, reiterating that it would be ‘some time’ before ‘substantial further progress’ was made and tapering of quantitative easing began. The Fed also dismissed the rising inflation expected over the coming months as ‘transitory’. Meanwhile, the European Central Bank kept interest rates on hold and said it was too early to talk about tightening monetary policy.
US treasury yields fell in April on easing concerns that US interest rates would rise sooner than expected, while German bund yields rose as the pace of COVID-19 vaccinations increased in Europe. Gilt yields were broadly unchanged.
What’s happening?
Despite concerns about spikes in COVID-19 infections in a number of key countries, credit spreads still tightened, supported by the gradual reopening of economies, positive economic data, and strong earnings results.
The US Federal Reserve (Fed) left policy unchanged, reiterating that it would be ‘some time’ before ‘substantial further progress’ was made and tapering of quantitative easing began. The Fed also dismissed the rising inflation expected over the coming months as ‘transitory’. Meanwhile, the European Central Bank kept interest rates on hold and said it was too early to talk about tightening monetary policy.
US treasury yields fell in April on easing concerns that US interest rates would rise sooner than expected, while German bund yields rose as the pace of COVID-19 vaccinations increased in Europe. Gilt yields were broadly unchanged.
Outlook
As we expect continued monetary and fiscal support over the medium term to ensure a full economic recovery, we believe 2021 will be all about carry.
While we aim to remain overweight in high yield and emerging markets in order to optimise the carry of the portfolio, we also plan to gradually reduce this overweight over the coming months as valuations have become very expensive, starting with emerging markets.
No assurance can be given that the Global Short Duration strategy will be successful. Investors can lose some or all of their capital invested. The Global Short Duration strategy is subject to risks including credit risk, liquidity risk and interest rate risk and counterparty risk. The strategy is also subject to derivatives and leverage, emerging markets and global investment risks.
What are short duration bonds?
Offer a first step onto the credit ladder with less uncertainty
Find out moreVisit the fund centre
Find out more about our short duration strategies.
The aim of the Fund is to provide income combined with any capital growth.
View fundsThe aim of the Fund is to provide income combined with any capital growth.
View fundsThe aim of the Fund is to generate income by investing in high yield debt securities (being sub-investment grade corporate bonds) while seeking to avoid the risk of default.
View fundsNot for Retail distribution
This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.
This promotional communication does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.
Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee that forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.
Before making an investment, investors should read the relevant Prospectus and the Key Investor Information Document / scheme documents, which provide full product details including investment charges and risks. The information contained herein is not a substitute for those documents or for professional external advice.
The products or strategies discussed in this document may not be registered nor available in your jurisdiction. Please check the countries of registration with the asset manager, or on the web site https://www.axa-im.com/en/registration-map, where a fund registration map is available. In particular units of the funds may not be offered, sold or delivered to U.S. Persons within the meaning of Regulation S of the U.S. Securities Act of 1933. The tax treatment relating to the holding, acquisition or disposal of shares or units in the fund depends on each investor’s tax status or treatment and may be subject to change. Any potential investor is strongly encouraged to seek advice from its own tax advisors.
Past performance is not a guide to current or future performance, and any performance or return data displayed does not take into account commissions and costs incurred when issuing or redeeming units. The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested. Exchange-rate fluctuations may also affect the value of their investment. Due to this and the initial charge that is usually made, an investment is not usually suitable as a short term holding.
Risk Warning
The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested.