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 Strategic Bond Fund - October 2023

  • 02 November 2023 (5 min read)

The great government bond sell off

  • ECB hike to 4.0% and the BoE and Fed hold fire but markets price higher for longer
  • Higher yields provoke nervousness about the sustainability of government debt
  • Valuations more attractive, momentum negative but arguably the higher yields are tightening financial conditions, and doing the work of central banks

What’s happening?

The ECB hiked interest rates to 4.0% in September while the BoE and Fed left rates unchanged, despite the different actions of the three major central banks they share the common narrative of keeping rates higher for longer.

Following central banks’ policy decision government bonds sold off at the end of September and are yielding at their highest levels both year to date and some markets are back to pre-global financial crisis levels.

The  curve steeping trend continues as the 30-year Treasury saw its biggest quarterly increase since 2009.

Unlike August, risky assets fell throughout the month and of the 12 bond indices which broadly represent the Global Strategic Bonds strategy’s investment universe, European high yield was the only fixed income asset class which achieved a positive total return in September, 0.4%.  

Portfolio positioning and performance

Defensive (25%): As with previous months we have maintained our >6 years duration exposure and are continuing to concentrate this in the US Treasuries curve, with focus on shorter dated maturities to benefit from further steepening of the yield curve.

Intermediate (30%): Exposure to the strategy’s intermediate risk bucket remains broadly unchanged, however we have added to a US IG name in the energy sector following a recent new issue. We also reduced exposure to the banking sector as the volatility from much earlier in the year gets increasingly priced out.

Aggressive (46%): Small increase to our allocation to US and European high yield throughout the month, with a preference for banking and financial names in Europe. The lower credit quality markets continue to outperform other markets although it has been slightly negatively impacted by the broader government bond sell off during the month.


We remain with the view that government bonds are attractively priced although has been challenged during a very difficult September. We believe we are now more than ever are closer to the peak in interest rates and we should position ourselves for a curve steepening and weaker economic environment.

Rising government bond yields make it more expensive for governments to service national debt, as such the bond sell off we have seen in September has added to the fear that the current level of yields are unsustainable for issuers. This creates a nervousness around the stability of bond markets, potentially fuelling further volatility.

The positive side to government bonds selling off is the attractive valuations on offer. Our view is that despite potential short run volatility, over a medium to long term horizon there has not been a more attractive entry point into rate sensitive fixed income assets in past 10 years.

Spreads have outperformed rates year to date and September was no different. This rosy picture surrounding credit can only continue as long as the underlying credits continue to perform well. Whilst, by-and-large, they still are, we are keeping a close eye on tentative signs of a worsening macroeconomic picture.

Download the full monthly perspective
Download report (291.68 KB)
Fixed Income

Unconstrained Fixed Income

This provides the potential flexibility to capitalise on opportunities across the fixed income spectrum as and when they arise.

Learn more

Related Articles

Fixed Income

Sterling Credit Short Duration strategy - April 2024

Fixed Income

Global Short Duration strategy - April 2024

Fixed Income

Global Short Duration strategy - March 2024


    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.

    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.

    This document is for informational purposes only and 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. The strategies discussed in this document may not be available in your jurisdiction.

    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 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.

    Please note that the management company reserves the right, at any time, to no longer market the product(s) mentioned in this communication in a European Union country by notification to its authority of supervision in accordance with European passport rules. In the event of dissatisfaction with the products or services, you have the right to make a complaint either with the marketer or directly with the management company (more information on our complaints policy available in English here). You also have the right to take legal or extra-judicial action at any time if you reside in one of the countries of the European Union. The European online dispute resolution platform allows you to enter a complaint form (by clicking here) and informs you, depending on your jurisdiction, about your means of redress (by clicking here).

    Issued in the U.K. 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.