Warning: members of the public are being contacted by people claiming to work for AXA Investment Managers UK Limited.  Find out more information and what to do by clicking here.

Fixed Income

Global Short Duration strategy - May 2021

  • 22 June 2021
  • 5min read

Markets await the next catalyst

  • Credit spreads were broadly unchanged in May as markets await the next catalyst
  • The US Federal Reserve continues to see the sharp rise in inflation as ‘transitory’
  • The risk profile was further reduced

What’s happening?

Credit spreads widened in the first part of the month due to concerns about rising inflation,  with the annual rate in the US leaping to a more than 12-year high in April, and the possibility that central banks, particularly the US Federal Reserve (Fed), would start to tighten monetary policy sooner than expected.

However, investors appeared to shrug off these concerns later in the month as Fed officials sought to assuage market fears about the timing of interest rate increases. Meanwhile, the European Central Bank kept interest rates on hold and insisted it was also too soon to talk about any changes to monetary policy, easing concerns about a potential tightening.

US treasury and UK gilt yields slightly fell in May, anchored by ongoing support from central banks, while German bund yields slightly rose as the pace of COVID-19 vaccinations continued to increase in Europe.

Portfolio positioning and performance

Sovereign: In order to further de-risk the portfolio, we increased our sovereign exposure by another 6% to 17% by adding to short-dated US treasury inflation-linked bonds and, US and UK nominal bonds. We also further reduced the duration of the Fund, as successful vaccination programmes in most developed countries should lead to higher yields due to a faster and sustainable reopening of their economies.

Investment Grade: We slightly reduced our exposure to investment grade by 1% to 42% in order to reallocate towards sovereign debt. We were active in both primary and secondary markets, participating in several attractive new issues from financial companies.

High Yield and Emerging Markets: We decreased our exposure to high yield and emerging markets by 3% to 37% by reducing our exposure to US high yield and by selling expensive investment grade rated emerging markets names. We were active in both primary and secondary markets, adding several very short-dated bonds from European high yield issuers.

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.

We expect yields to further rise as successful vaccination programmes in most developed countries should lead to a faster and sustainable reopening of their economies.

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.

Read the full article
Download article (281.86 KB)
Fixed income

Why consider a short duration strategy?

Short duration bonds can offer a smart alternative to government bonds or cash in the bank

Find out more

Visit the fund centre

Find out more about our key short duration fixed income strategies.

Fixed Income
Sterling credit short duration strategy

The aim of the Fund is to provide income combined with any capital growth.

View funds
Fixed income
Global short duration bond strategy

https://funds.axa-im.co.uk/en/fund-centre/-/funds-center/axa-global-short-duration-bond-fund-z-gbp-acc-56311#/

View funds
Fixed income
US short duration high yield strategy

The 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 funds

Have our latest insights delivered straight to your inbox

SUBSCRIBE NOW
Subscribe to updates.

Related Articles

Equities

Robotech strategy - August 2021

  • 22 September 2021
  • 5min read
Equities

Clean Economy strategy - August 2021

  • 22 September 2021
  • 5min read
Equities

Longevity Economy strategy - August 2021

  • 22 September 2021
  • 5min read

    Not 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.