Global Short Duration strategy - April 2021
Credit spreads tightened as government bond yields stabilised
- Credit spreads were tighter, supported by the gradual reopening of economies and lower US treasury yields
- The US Federal Reserve (Fed) continued to dismiss talk about early tapering of quantitative easing
- The risk profile was further reduced
What’s happening?
Despite concerns about spikes in COVID-19 infections in a number of key countries, credit spreads still tightened, supported by the gradual reopening of economies, positive economic data, and strong earnings results.
The US Federal Reserve (Fed) left policy unchanged, reiterating that it would be ‘some time’ before ‘substantial further progress’ was made and tapering of quantitative easing began. The Fed also dismissed the rising inflation expected over the coming months as ‘transitory’. Meanwhile, the European Central Bank kept interest rates on hold and said it was too early to talk about tightening monetary policy.
US treasury yields fell in April on easing concerns that US interest rates would rise sooner than expected, while German bund yields rose as the pace of COVID-19 vaccinations increased in Europe. Gilt yields were broadly unchanged.
What’s happening?
Despite concerns about spikes in COVID-19 infections in a number of key countries, credit spreads still tightened, supported by the gradual reopening of economies, positive economic data, and strong earnings results.
The US Federal Reserve (Fed) left policy unchanged, reiterating that it would be ‘some time’ before ‘substantial further progress’ was made and tapering of quantitative easing began. The Fed also dismissed the rising inflation expected over the coming months as ‘transitory’. Meanwhile, the European Central Bank kept interest rates on hold and said it was too early to talk about tightening monetary policy.
US treasury yields fell in April on easing concerns that US interest rates would rise sooner than expected, while German bund yields rose as the pace of COVID-19 vaccinations increased in Europe. Gilt yields were broadly unchanged.
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.
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.
What are short duration bonds?
Offer a first step onto the credit ladder with less uncertainty
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Find out more about our short duration strategies.
The aim of the Fund is to provide income combined with any capital growth.
View fundsThe aim of the Fund is to provide income combined with any capital growth.
View fundsThe 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 fundsNot for Retail distribution
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