Short Duration Range
Why Short Duration Bonds?
Short duration bonds are a way for investors to mitigate market volatility and rising interest rates. AXA Investment Managers’ short duration range seeks exposure to attractive growth markets while maintaining a compelling riskreturn profile. Here are reasons to look into short duration bonds.
Ability to mitigate the impact of market volatility
Short duration investing offers lower volatility and drawdowns when compared to the wider, all maturities markets. This is
predominantly because the price of bonds that are closer to maturity tends to be closer to par than longer duration bonds, and
the discounted value of coupon payments is less sensitive to changes in interest rates.
Lower sensitivity to rising interest rates
Interest rates and bond prices usually move in opposite directions, therefore rising yields
could have an adverse impact on bond prices. Due to their shorter maturities, short duration bonds
can mitigate losses in periods of rising interest rates, as cash flows from maturing bonds can be
reinvested at higher rates in the market.
Increases portfolio liquidity
Exhibiting a naturally attractive liquidity profile, due to regular cash flows from maturing
bonds and coupon income, a short duration strategy is able to minimise turnover when
implementing active strategies. Holding bonds until their maturity also implies lower transaction
costs, which may improve returns over the long-term.