Euro Government Bonds uses four sources of return to reach the alpha target over the cycle:
Risk profile and spread outlook for the individual countries is evaluated against the differences in yield. This results in overweight and underweight positions on a country level.
The aim of duration management is to profit from changes in interest rates.
Yield curve positioning
Whereas duration decisions anticipate a parallel shift in the yield curve, yield curve positions aim to anticipate steepening or flattening twists in the yield curve.
Government-related bonds typically offer a somewhat higher yield than comparable government bonds, partly because of their lower liquidity.
The four steps in our investment process:
We apply our research framework to all the aspects that drive markets. The team looks at the economic cycle, monetary and fiscal policy, discusses its strategies and sets strategic positioning in the quarterly meetings.
We decide which issues we like best, and these are then combined in a model portfolio.
The portfolio managers assess risk across the four sources of return mentioned earlier: country allocation, duration, yield curve and relative value.
The final step is portfolio implementation. The Fixed Income Portfolio Engineering and Trading team implements the model portfolio into client portfolios and performs trading cost analysis.
A central investment of a long-term portfolio
A true understanding of the topic has been in our DNA since the start