VP Bank: Concern on the bond market


Government bond yields have risen around the world since the start of the year. 10-year US Treasuries rose to 1.80%, after 1.51% on the last day of December. The yield on Swiss government bonds managed to move back into positive territory, showing the flip side of the price movement. Thanks to our strong underweighting in government bonds, we were able to limit the negative impact of this movement on the portfolio.

Investments with a high duration, that is to say with a high sensitivity to interest rates, are under pressure due to this rise in interest rates. On equities, this affected growth stocks in general and technology stocks in particular. Value stocks and minimum variance strategies, on the other hand, performed well in the early days of trading.

The rise in interest rates shows that the issue of inflation is far from being ruled out. Inflation rose again in many European countries in December and, according to the latest US labor market data, wages are now also on the rise. This raises concerns that, at least in the United States, the wage-price spiral has been triggered.

This concern also echoes in the latest statements by representatives of the US Federal Reserve. This is why bond purchases have been cut even faster since January and the first interest rate hike is expected as early as March. The Fed is therefore sending an unequivocal signal: they are ready.

With the clear message from the Fed, there is a good chance that inflation expectations will not escalate and the situation in the stock markets will calm down. In this context, we are confirming our tactical positioning.


VP Bank SA published this content on January 11, 2022 and is solely responsible for the information it contains. Distributed by Public, unedited and unmodified, on January 11, 2022 03:57:02 PM UTC.


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