Many investors they benefited from returns from higher income, Since the media coupon weighted for the bond index market has been growing since 2021 – and will probably continue to rise, as the lower coupon bonds issued before 2021 will expire. Underlines it Chris Iggo, Chief Investment Officer of Axa im core explaining that in the last 10 years, the performance composed of a typical investment-grade index in dollars has been approximately 4%, while the European equivalent stood at a short time above 2%. For the High Yield in dollars, the yield approached 6.5%. And with the increase in medium coupons, income returns they could continue to climb.
Because constant incomes should not be overlooked
Naturally, the prices of bonds They can be volatile. If not detained until the deadline, they may undergo losses due to changes in expectations on interest rates or on credit spreads. To manage this risk, investors can choose intrinsically less volatile strategies, such as short -term credit strategies.
Alternatively, they can rely on active managers who aim to maximize income and reduce prices volatility, through coverage and other active decisions. GInvestors can also aim for an income sUpper average of the index – with allocation in bonds with higher coupons. It is unlikely that income returns return to the pre-2008 levels, but are becoming more interesting, thanks to the increase in bond returns since 2021. Given the uncertainty on the Outlook Macro, i stable income returns nthey should be neglected in the construction of balanced wallets.
European state securities: liquidity -guided assessments
Those who invest in fixed income may have noticed a rather wide oscillation in the evaluation of German government bonds (bund) compared to swaps on interest rates in the post-covid-19 period. In the two years until September 2022, in fact, the bunds have become expensive compared to the swap curve on interest rates, he explains Alessandro Tentori, Chief Investment Officer Europe Axa IM stressing that since then there has been a depreciation of 100 basic bund points compared to the swaps, thus canceling the “natural margin” that risk -free bonds should have compared to those with risk. Analyze the Bund’s Swap spread from a microeconomic perspective opens the door to variables as an excess of demand and collateral scarcity – variables related to the activity of the main bond actor of the last decade: the European Central Bank.
The quantitative ESSING Post-Pandemia has had an impact on scarcity Perceived of the bunds, thus increasing the concerns of liquidity for the European reference obligation and pushing the assessments relating to extreme levels. In the same way, the ECB decision to reduce unconventional monetary policy operations starting from July 2022 has put a brake on the spectrum of liquidity, reversing the route of the Bund spreads. In fact, other European state government bonds have become more convenient than the swaps following the reduction of the purchases of the ECB and fears of an increase in the offer: for some investors, this will have made European government bonds A more interesting fixed income asset compared to swaps and corporate bonds.
Asia: a pending region
The Asian macroeconomic environment has become increasingly demanding from the point of view of growth, monetary policy and currency. Commercial duties, the path of interest rates of the Fed and the strength of the US dollar constitute the main risk factors, observes andCaterina BigosChief Investment Officer, Asia Ex-Japan, Axa im core. The political agenda of the United States on the duties – explains the expert – represents the greater direct vulnerability, given that many Asian countries manage some of the major bilateral commercial surpluses with the United States, but also indirect, due to relatively high economic termination with China. Although inflation has decreased in most Asian economies in 2024, the average remains above the objectives of most of the central banks, so the low real rate of the region compared to a strongest US dollar and higher core rates They contribute to aggravating the situation already problematic in itself. The Policy path of the Federal Reserve remains a critical factor, since it could intensify capital deceased by the countries that loosen rates too aggressively.
Even in a context characterized by increases in the most measured duties, “it is likely that the flows by investors remain oriented towards the dollar. Most of the Asian currencies have depressed compared to the green ticket, in particular in the fourth quarter of last year, driven by the potential of a fewer number of cuts in the interest rates of the Fed. The currencies will probably be the pressure valve that will be used To adapt to any growth shock deriving from duties, with intraregional correlations probably more highly high – that is, before that political choices, internal imbalances and the relative tax space in the various economies lead to a divergence “.
