Commentaries

September 2018 - September reminds investors of duration risk and the importance of diversification - Tactical Fund Manager's Comments

9 October 2018

Cédric Daras, Clement Perrette, David Fung, Gilles Pradère, Olivier Mulin

Convertibles Europe 

Global Bond Total Return 

Asia Bond Total Return

 

In Europe, the disconnect between low bond yields and the interest rate risk expose investors to potential large losses. Be it political or economic reasons, reversals are more frequent in this environment. Italian government bonds have become the worst performers of the Eurozone after comfortably navigating in positive territory during the first months of the year. In September, the ECB President mentioned a “relatively vigorous” pickup in inflation. As a result, the yield on the 10yr German bund increased from 0.33% to 0.47%, costing investors several years of coupon on the same bonds! We strongly believe that diversification should take a centre stage in this late cycle phase.

 

Chart of the month: 

EUR-denominated bonds are also having their reversal time

 

RAM TACTICAL monthly chart EUR-denominated bonds are also having their reversal time

Source: Bloomberg