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.