AXA Global Strategic Bonds strategy - September 2022
UK bond market implosion adds to uncertainty
- The new UK government’s “mini budget” was met with a very negative market reaction
- UK gilt yields spiralled sharply higher and the Bank of England was forced to step in
- The strategy was well protected from a duration perspective in another volatile month
- Rate hikes, hawkish central bank narrative and continued sticky inflation data continues to drive markets as total returns were once again deeply negative for global fixed income during the month.
- Markets were hit with a new dynamic in September as the new UK Prime Minister and Chancellor announced a very generous fiscal package with no transparent funding plan accompanying it and hence sent UK bonds into a tailspin.
- The implosion of UK fixed income markets led to an unwind of leverage within the large pension fund industry and subsequently exacerbated the issue and led to large selling of credit and other assets. Once again in 2022, this sharp increase in volatility led markets lower.
- US 10-year bond yields moved nearly 65bps higher although ended off their 2022 peaks. UK 10-year gilt yields touched 4.5% having started the month below 3%. Investment grade credit spreads moved to their wides of the year, while developed market high yield markets moved lower in line with equities, although not yet at their cheapest levels year-to-date.
Unconstrained Fixed Income
This provides the potential flexibility to capitalise on opportunities across the fixed income spectrum as and when they arise.Find out more