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 - October 2021

  • 12 November 2021 (5 min read)

The yield curve flattens as the front-end underperforms

  • Credit spreads were mixed due to continued worries about inflation and policy tightening
  • Government bond yields rose, with the front-end underperforming
  • We continued to add to short dated inflation-linked bonds

What’s happening?

Despite positive corporate results, credit spreads were mixed in October due to continued worries about inflation, with oil prices soaring to multi-year highs, and the prospect of imminent monetary policy tightening.

The US Federal Reserve signalled that it could start ‘tapering’ its asset purchases in November, with a view to ending the programme by mid-2022, while the European Central Bank maintained its accommodative policy stance, emphasising the fragility of the economic recovery and temporary factors driving up inflation.

US treasury, German Bund and UK gilt yields rose in October, with the front-end underperforming, due to the prospect of looming policy tightening as illustrated by Bank of England officials hinting about the possibility of an imminent interest rate hike.

Portfolio positioning and performance

Sovereign: Our overall sovereign exposure remained stable at 30% as we switched out of nominal bonds into German and French inflation-linked bonds, early in the month, to benefit from supportive inflation indexation into year-end. As a result, our exposure to inflation-linked bonds increased by 8% to 15%.

Investment Grade: Our exposure to investment grade markets was broadly constant at 32% (vs. 33% last month) as several bonds matured and we reinvested some of the proceeds in the sterling market to benefit from attractive yields.

High Yield and Emerging Markets: While our exposure to high yield (HY) and emerging markets (EM) remained stable at 36%, we participated in an attractive new HY issue and sold protection on the Markit iTraxx Xover to unwind our position following improving market sentiment in the latter part of the month.


With valuations remaining very expensive and inflationary pressures persisting, we plan to retain our barbell strategy by keeping a higher exposure to sovereign bonds (and linkers) for defensiveness purposes and HY / EM to optimise carry, while keeping a lower exposure to investment grade markets.

We continue to expect higher yields by the end of the year as the impact of the pandemic on the global economy keeps on receding and inflationary pressures continue.

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 report (274.35 KB)

Related Articles

Fixed Income

The case for short duration investing

  • by Nicolas Trindade
  • 26 October 2023 (3 min read)
Fixed Income

Global Short Duration strategy - September 2023

  • by Nicolas Trindade
  • 19 October 2023 (5 min read)
Fixed Income

Fixed Income Quarterly Views by Marion Le Morhedec, Global Head of Fixed Income

  • by Marion Le Morhedec
  • 06 October 2023 (3 min 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.

    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.