Fixed Income: Coronavirus market volatility - performance update
Insights

Fixed Income: Coronavirus market volatility – performance update

Spreads are much wider and government bond yields are failing to respond to the developing crisis. Corporate and high yield spreads have now widened to such an extent that on a long-term basis both offer much more compelling value. Global IG is now around 1.5 standard deviations wide of the 20-year average, while European High Yield has risen by around 3% so far this year. This means market returns are pretty poor. Euro High Yield is down 13% while Global IG is off by more than 2% – the latter being “protected” by a longer duration and the fall in US Treasury yields.

Generally, our portfolios have been defensively positioned in terms of market risk and in sector and security choice. This means that for most funds we are ahead of the benchmark. The macro team were long duration going into the crisis, which has clearly been beneficial. Our Absolute Return funds, where we were once again defensively positioned, are off a little this year against cash benchmarks, but this must be considered in the context of the collapse in equity and other risk markets.

Liquidity is of course poor and reminds us of other crises. We note that EM and HY liquidity is very challenged, as is IG and even parts of the government bond market. Our suspicion is that investors are using this latter liquid area of the market to meet cash demands – hence the surprising performance seen recently.

The encouraging situation is that after being expensive at the start of the year, there has been significant value created at these wider spreads. As mentioned, IG and HY spreads are more than one standard deviation wide of the long run (including the global financial crisis) average. We conclude that much bad news is discounted in present levels. We also note the distress in passive funds with ETFs trading at material discounts to net asset value.

20 March 2020
David Oliphant
David Oliphant
Executive Director, Fixed Income
Share article
Share on linkedin
Share on email
Key topics
Related topics
Listen on Stitcher badge
Share article
Share on linkedin
Share on email
Key topics
Related topics

PDF

Fixed Income: Coronavirus market volatility – performance update

Important Information

The research and analysis included on this website has been produced by Columbia Threadneedle Investments for its own investment management activities, may have been acted upon prior to publication and is made available here incidentally. Any opinions expressed are made as at the date of publication but are subject to change without notice and should not be seen as investment advice. Information obtained from external sources is believed to be reliable but its accuracy or completeness cannot be guaranteed.

Related Insights

1 March 2024

Tochi Nwozuzu

Content Marketing Executive

Market Monitor – 1 March 2024

Global stock markets this week consolidated recent gains to round off a positive month as hopes of imminent interest rate cuts grow.
Read time - 3 min
1 March 2024

Anthony Willis

Investment Manager

Multi-Manager - will interest rates ever slow economies down?

The rugby last weekend was arguably more exciting than markets this week, with most days very quiet for news flow, and the major highlight being the US Core PCE numbers, which is the Federal Reserve’s preferred measure of inflation.
Read time - 5 min
1 March 2024

Neil Robson

Head of Global Equities

Unknown pleasures: a new era for equity investors

With the biggest tightening in monetary policy since the 1980s, it’s all change for economies, markets and investors.
Read time - 3 min
true
true

Important Information

The research and analysis included on this website has been produced by Columbia Threadneedle Investments for its own investment management activities, may have been acted upon prior to publication and is made available here incidentally. Any opinions expressed are made as at the date of publication but are subject to change without notice and should not be seen as investment advice. Information obtained from external sources is believed to be reliable but its accuracy or completeness cannot be guaranteed.

You may also like

Investment approach

Teamwork defines us and is fundamental to our investment approach, which is structured to facilitate the generation, assessment and implementation of good, strong investment ideas for our portfolios.

Funds and Prices

Columbia Threadneedle Investments has a comprehensive range of investment funds catering for a broad range of objectives.

Our Capabilities

We offer a broad range of actively managed investment strategies and solutions covering global, regional and domestic markets and asset classes.

Thank you. You can now visit your preference centre to choose which insights you would like to receive by email.

To view and control which insights you receive from us by email, please visit your preference centre.

Play Video

CT Property Trust- Fund Manager Update

Sed ut perspiciatis unde omnis iste natus error sit voluptatem accusantium doloremque laudantium