Faced with the mega fiscal stimulus in the United States, increased inflation and an upcoming tapering by the Federal Resrve, experts from Union Bancaire Privée (UBP) suggest favoring shorter durations in bonds. “We believe that the risks are still skewed towards higher yields, while looking forward we do not rule out an increase in volatility – explains Norman Villamin, UBP Chief Investment Officer Wealth Management – As a result, we maintain short duration and favor carry strategies”.
Against this backdrop, the scenario remains positive for leveraged asset classes. “The better carry-to-duration ratio ensured by the leveraged loan index is a key factor in supporting our positive view,” the expert explains.
More caution, on the other hand, on emerging market debt, in particular on corporate debt, due to the regulatory risk in China, the rise in US rates and inflation.
“That said – UBP concludes – as valuations are contracted in most fixed income asset classes, we expect coupon yields to be the winners of the second half of the year. We continue to rely on a selection of stocks to drive. alpha generation and avoid long-term debt that could be hit by higher yields. “