News Digest: Money managers go short to hedge inflation risks
February 24, 2023
A new report says fund managers are actively adding to their portfolios and sticking to short term credit maturity in order to hedge the risk of a prolonged period of inflation. While some funds are reducing the duration actively to limit the fallouts of further rate hikes, others are simply adding short-dated notes.
These movements have come amidst a shift among the trading community that central banks may continue with their monetary tightening through rate hikes. Recent reality checks around the US and European economies have fuelled fears that interest rates could continue going up without any actual fear of a steep recession.
These changes also reflect the growing caution in the investment-grade corporate bond market, given that their profits from earlier this year have slipped away. Having risen to record levels in January, global high-grade bonds shed almost four-fifths of their 2023 gains in February. According to Bloomberg indexes, the gains stood pared to just 1.1% this year.