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.

Global Short Duration strategy - June 2022

  • 15 July 2022 (5 min read)

Upside surprises on inflation trigger recession fears

  • Credit spreads widened significantly due to rampant inflation and recession fears
  • Government bond yields were higher despite the large sell-off in risk assets
  • The risk profile was broadly unchanged

What’s happening?

Despite the easing of COVID-19 quarantine restrictions in China, credit spreads widened significantly due to rampant inflation and increased recession fears as central banks pressed ahead with interest rate hikes.

The US Federal Reserve raised interest rates for a third consecutive time by 0.75% to the range of 1.5% to 1.75%, its biggest hike since 1994, as inflation surprised to the upside in May at 8.6%, a 40-year high. Meanwhile the Bank of England raised interest rates for a fifth consecutive time by 0.25% to 1.25% as inflation reached 9.1% in May, also a 40-year high. Finally, the European Central Bank struck a hawkish tone at its policy meeting and is expected to announce an interest rate rise in July as inflation reached a new record high of 8.6% in June.

Despite the large sell-off in risk assets, US treasury, German bund and UK gilt yields rose as the market focused on the impact of still rising inflation on the future path of interest rates.

Portfolio positioning and performance

Sovereign: Our exposure to sovereign bonds was broadly stable at 13% (versus 12% last month) as we remained invested in US, German and UK inflation-linked bonds to benefit from still attractive inflation indexation over the next couple of months. We increased the duration of the portfolio to 2.9 years from 2.7 years due to attractive valuations and rising recession risk which should support government bonds.

Investment Grade: Our exposure to investment grade markets was unchanged at 48% as activity was limited with only one new issue being bought in the US dollar primary market.

High Yield and Emerging Markets: Our exposure to high-yield and emerging markets decreased by 2% to 37% as we reduced our exposure to US high-yield due to the risk-off environment. We are waiting for better entry points before adding back to these asset classes.


We expect market conditions to remain very volatile over the short-term due to continued inflationary pressures, hawkish central banks, a protracted conflict in Ukraine and increased risk of a recession next year. In such an environment, it is paramount to retain flexibility and manage actively the duration and credit exposure.

As inflation should start gradually falling over the coming quarters, we expect yields to consolidate at these higher levels since they already reflect a very aggressive pace of tightening by central banks, helping credit spreads to also stabilise.

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.

Download the full monthly perspective
Download report (254.61 KB)
Fixed Income

What are short duration bonds?

A short duration bond is generally a bond with a short time to maturity. At AXA IM we define this period as 5 years or less.

Find out more

Visit our fund centre

Fixed Income
Global Short Duration Bond Strategy

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

View funds


    Not for Retail distribution: This marketing communication 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 marketing 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 marketing communication 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 marketing communication 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.

    Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 22 Bishopsgate, London EC2N 4BQ. In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.

    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. 

    Are you an IFA or other Professional Investor ?

    Are you a financial advisor, institutional, or other professional investor?

    This section is for professional investors only. You need to confirm that you have the required investment knowledge and experience to view this content. This includes understanding the risks associated with investment products, and any other required qualifications according to the rules of your jurisdiction.