For fixed income investors, the current environment warrants an approach that limits exposure to rising rates and high levels of volatility. We believe short-maturity strategies offer a way to manage these risks, as they can be used to reduce volatility, which could help as liquidity starts to dry up toward year-end. In addition, while reducing duration risk often implies forfeiting yield, the current flatness of yield curves means that short-duration strategies compare favourably against their all-maturity counterparts.
Bond markets remain volatile, with the start to Q4 seeing the US 10-year yield rise to a new cycle high of close to 4.25% before falling back to 4%. While the market now appears better supported, the path for rates will be determined by inflation. If inflation refuses to fall, optimism that the market has priced peak rates may give way to renewed selling of bonds – similar to what happened over the summer. For this reason, in the Q4 Bond Compass we suggested short-duration positions, limiting exposure to rising rates and high levels of volatility.
Reducing duration risk often implies forfeiting yield. However, this year’s aggressive re-pricing of the profile for central bank rate rises means this trade-off is less of a concern now that yield curves are quite flat. Indeed, the money markets imply Fed rates rising to May 2023 before easing back, while for the ECB and the BoE they are seen topping out over the summer of 2023.
For those investors looking to benefit from the higher yields on offer, post the summer correction in bond prices, yield can also be enhanced by focusing on investment grade (IG) credit strategies rather than straight government bonds. The flatness of the curve means that the yield to worst on the Bloomberg 0-5 Year Sterling Corporate Bond Index is 5.85%, just 3bp below that for the all-maturity Bloomberg Sterling Corporate bond Index1.
In other words, the trade-off between duration risk and yield looks far more favourable at the front end of the curve than for longer maturities. Figure 1 provides an illustration, where the horizontal axis shows the amount of yield per year of duration2 for various IG credit strategies. The four highest yielding ones relative to their duration risk are all short-maturity indices. Note also that the Bloomberg SASB Euro Corporate 0-3 year ESG Ex-Controversies Select Index offers a slightly better trade-off than the market-weighted Bloomberg Euro Corporate 0-3 Year Index.
Figure 1: Investment Grade Credit Has Undergone a Significant Re-Pricing
Are credit spreads wide enough?
The risk with opting for credit rather than government exposure is that a growth slowdown is in motion. The composite PMIs for the US, euro area and UK were all below 50 for October, signalling contraction. With limited visibility on how extreme the slowdown may become, investors should exercise caution around lower-rated exposures. However, it is also clear from Figure 1 that some IG exposures have already priced a considerable risk of an economic slowdown. The vertical axis shows the extent to which the option-adjusted spreads (the credit risk premium) have widened since the end of 2021. Euro and sterling bonds have widened by over 100bp, taking them to levels close to the extremes seen during the peak of the COVID crisis in early 2020. This is a considerably larger re-pricing than their USD-denominated counterparts.
High energy costs in Europe and their impact on growth and inflation have forced the credit premium materially wider in Europe than in the US. However, there are some signs of relief, with natural gas now having largely reversed the rise in prices seen since June3. This should reduce the tail risk scenario of a deep and prolonged slowdown in Europe but is not yet reflected in credit spreads, which remain close to their wides.
In summary, short-maturity strategies have several appealing features.
They can be used to reduce price volatility during what has been a historically volatile period. This may be desirable into year-end as liquidity starts to dry up.
The flatness of curves means that there is little ‘give-up’ of yield by sticking to the short end. Indeed, short-maturity strategies show a far higher yield per year of duration than their all maturity counterparts.
Credit spreads in Europe price a meaningful slowdown. They have yet to respond to the easing of energy prices, which should reduce risks of a deep recession, or to the slightly more dovish tone to the ECB at last Thursday’s meeting.
How to play this theme
Investors looking to play the short-maturity approach described above can do so with a SPDR ETF. To learn more about the ETF, and to view its full performance history, please click on the link below to visit the fund page.
1 Source: Bloomberg Finance L.P., as of 28 October 2022.
2 Yield to worst divided by the option-adjusted duration.
3 Netherlands TTF Natural Gas Forward Month 1 prices are back at levels last seen in mid-June 2022.
Information Classification: General Access.
For professional clients use only.
For Investors in Austria: The offering of SPDR ETFs by the Company has been notified to the Financial Markets Authority (FMA) in accordance with section 139 of the Austrian Investment Funds Act. Prospective investors may obtain the current sales Prospectus, the articles of incorporation, the KIID as well as the latest annual and semi-annual report free of charge from State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89-55878-400.F: +49 (0)89-55878-440.
For Investors in Finland: The offering of funds by the Companies has been notified to the Financial Supervision Authority in accordance with Section 127 of the Act on Common Funds (29.1.1999/48) and by virtue of confirmation from the Financial Supervision Authority the Companies may publicly distribute their Shares in Finland. Certain information and documents that the Companies must publish in Ireland pursuant to applicable Irish law are translated into Finnish and are available for Finnish investors by contacting State Street Custodial Services (Ireland) Limited, 78 Sir John Rogerson’s Quay, Dublin 2, Ireland.
For Investors in France: This document does not constitute an offer or request to purchase shares in the Company. Any subscription for shares shall be made in accordance with the terms and conditions specified in the complete Prospectus, the KIID, the addenda as well as the Company Supplements. These documents are available from the Company centralizing correspondent: State Street Banque S.A., Coeur Défense - Tour A - La Défense 4 33e étage 100, Esplanade du Général de Gaulle 92 931 Paris La Défense cedex France or on the French part of the site ssga.com/etfs. The Company is an undertaking for collective investment in transferable securities (UCITS) governed by Irish law and accredited by the Central Bank of Ireland as a UCITS in accordance with European Regulations. European Directive no. 2014/91/EU dated 23 July 2014 on UCITS, as amended, established common rules pursuant to the cross-border marketing of UCITS with which they duly comply. This common base does not exclude differentiated implementation. This is why a European UCITS can be sold in France even though its activity does not comply with rules identical to those governing the approval of this type of product in France.The offering of these compartments has been notified to the Autorité des Marchés Financiers (AMF) in accordance with article L214-2-2 of the French Monetary and Financial Code.
For Investors in Germany: The offering of SPDR ETFs by the Companies has been notified to the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) in accordance with section 312 of the German Investment Act. Prospective investors may obtain the current sales Prospectuses, the articles of incorporation, the KIIDs as well as the latest annual and semi-annual report free of charge from State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich. Telephone: +49 (0)89-55878-400. Facsimile: +49 (0)89-55878-440.
Israel: No action has been taken or will be taken in Israel that would permit a public offering of the Securities or distribution of this sales brochure to the public in Israel. This sales brochure has not been approved by the Israel Securities Authority (the ‘ISA’).
Accordingly, the Securities shall only be sold in Israel to an investor of the type listed in the First Schedule to the Israeli Securities Law, 1978, which has confirmed in writing that it falls within one of the categories listed therein (accompanied by external confirmation where this is required under ISA guidelines), that it is aware of the implications of being considered such an investor and consents thereto, and further that the Securities are being purchased for its own account and not for the purpose of re-sale or distribution.
This sales brochure may not be reproduced or used for any other purpose, nor be furnished to any other person other than those to whom copies have been sent.
Nothing in this sales brochure should be considered investment advice or investment marketing as defined in the Regulation of Investment Advice, Investment Marketing and Portfolio Management Law, 1995 (“the Investment Advice Law”). Investors are encouraged to seek competent investment advice from a locally licensed investment advisor prior to making any investment. State Street is not licensed under the Investment Advice Law, nor does it carry the insurance as required of a licensee thereunder.
This sales brochure does not constitute an offer to sell or solicitation of an offer to buy any securities other than the Securities offered hereby, nor does it constitute an offer to sell to or solicitation of an offer to buy from any person or persons in any state or other jurisdiction in which such offer or solicitation would be unlawful, or in which the person making such offer or solicitation is not qualified to do so, or to a person or persons to whom it is unlawful to make such offer or solicitation.
Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Italy is registered in Italy with company number 11871450968 - REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155.
For Investors in Luxemburg: The Companies have been notified to the Commission de Surveillance du Secteur Financier in Luxembourg in order to market its shares for sale to the public in Luxembourg and the Companies are notified Undertakings in Collective Investment for Transferable Securities (UCITS).
Netherlands: This communication is directed at qualified investors within the meaning of Section 2:72 of the Dutch Financial Markets Supervision Act (Wet op het financieel toezicht) as amended. The products and services to which this communication relates are only available to such persons and persons of any other description should not rely on this communication. Distribution of this document does not trigger a licence requirement for the Companies or SSGA in the Netherlands and consequently no prudential and conduct of business supervision will be exercised over the Companies or SSGA by the Dutch Central Bank (De Nederlandsche Bank N.V.) and the Dutch Authority for the Financial Markets (Stichting Autoriteit Financiële Markten). The Companies have completed their notification to the Authority Financial Markets in the Netherlands in order to market their shares for sale to the public in the Netherlands and the Companies are, accordingly, investment institutions (beleggingsinstellingen) according to Section 2:72 Dutch Financial Markets Supervision Act of Investment Institutions.
Norway: The offering of SPDR ETFs by the Companies has been notified to the Financial Supervisory Authority of Norway (Finanstilsynet) in accordance with applicable Norwegian Securities Funds legislation. By virtue of a confirmation letter from the Financial Supervisory Authority dated 28 March 2013 (16 October 2013 for umbrella II) the Companies may market and sell their shares in Norway.
For Investors in Spain: State Street Global Advisors SPDR ETFs Europe I and II plc have been authorised for public distribution in Spain and are registered with the Spanish Securities Market Commission (Comisión Nacional del Mercado de Valores) under no.1244 and no.1242. Before investing, investors may obtain a copy of the Prospectus and Key Investor Information Documents, the Marketing Memoranda, the fund rules or instruments of incorporation as well as the annual and semi-annual reports of State Street Global Advisors SPDR ETFs Europe I and II plc from Cecabank, S.A. Alcalá 27, 28014 Madrid (Spain) who is the Spanish Representative, Paying Agent and distributor in Spain or at spdrs.com. The authorised Spanish distributor of State Street Global Advisors SPDR ETFs is available on the website of the Securities Market Commission (Comisión Nacional del Mercado de Valores).
Switzerland: The collective investment schemes referred to herein are collective investment schemes under Irish law. Prospective investors may obtain the current sales prospectus, the articles of incorporation, the KIID as well as the latest annual and semi-annual reports free of charge from the Swiss Representative and Paying Agent, State Street Bank International GmbH, Munich, Zurich Branch, Beethovenstr. 19, 8027 Zurich, as well as from the main distributor in Switzerland, State Street Global Advisors AG, Beethovenstrasse 19, 8027 Zurich. Before investing please read the prospectus and the KIID, copies of which can be obtained from the Swiss representative, or at ssga.com.
United Kingdom: The Funds have been registered for distribution in the UK pursuant to the UK’s temporary permissions regime under regulation 62 of the Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2019. The Funds are directed at 'professional clients' in the UK (as defined in rules made under the Financial Services and Markets Act 2000) who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description should not rely on this communication. Many of the protections provided by the UK regulatory system do not apply to the operation of the Funds, and compensation will not be available under the UK Financial Services Compensation Scheme.
This document has been issued by State Street Global Advisors Limited (“SSGA”). Authorized and regulated by the Financial Conduct Authority, Registered No.2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. Telephone: 020 3395 6000. Facsimile: 020 3395 6350 Web: ssga.com.
This document has been issued by State Street Global Advisors Europe Limited (“SSGAEL”), regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered number 49934. T: +353 (0)1 776 3000. Fax: +353 (0)1 776 3300. Web: ssga.com.
SPDR ETFs is the exchange traded funds (“ETF”) platform of State Street Global Advisors and is comprised of funds that have been authorised by Central Bank of Ireland as open-ended UCITS investment companies.
State Street Global Advisors SPDR ETFs Europe I & II plc issue SPDR ETFs, and is an open-ended investment company with variable capital having segregated liability between its sub-funds. The Company is organised as an Undertaking for Collective Investments in Transferable Securities (UCITS) under the laws of Ireland and authorised as a UCITS by the Central Bank of Ireland.
The information provided does not constitute investment advice as such term is defined under the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell any investment. It does not take into account any investor's or potential investor’s particular investment objectives, strategies, tax status, risk appetite or investment horizon. If you require investment advice you should consult your tax and financial or other professional advisor.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
ETFs trade like stocks, are subject to investment risk and will fluctuate in market value. The investment return and principal value of an investment will fluctuate in value, so that when shares are sold or redeemed, they may be worth more or less than when they were purchased. Although shares may be bought or sold on an exchange through any brokerage account, shares are not individually redeemable from the fund. Investors may acquire shares and tender them for redemption through the fund in large aggregations known as “creation units.” Please see the fund’s prospectus for more details.
Bonds generally present less short-term risk and volatility than stocks, but contain interest rate risk (as interest rates raise, bond prices usually fall); issuer default risk; issuer credit risk; liquidity risk; and inflation risk. These effects are usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio's specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio's ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data.
The views expressed in this material are the views of SPDR EMEA Strategy & Research through the period ending 27 October 2022 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Past performance is not a reliable indicator of future performance.
Investing involves risk including the risk of loss of principal.
This information should not be considered a recommendation to invest in a particular sector or to buy or sell any security shown. It is not known whether the sectors or securities shown will be profitable in the future.
Standard & Poor’s, S&P and SPDR are registered trademarks of Standard & Poor’s Financial Services LLC (S&P); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use by S&P Dow Jones Indices LLC (SPDJI) and sublicensed for certain purposes by State Street Corporation. State Street Corporation’s financial products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and third party licensors and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability in relation thereto, including for any errors, omissions, or interruptions of any index.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss Regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Investing in foreign domiciled securities may involve risk of capital loss from unfavourable fluctuation in currency values, withholding taxes, from differences in generally accepted accounting principles or from economic or political instability in other nations. Investments in emerging or developing markets may be more volatile and less liquid than investing in developed markets and may involve exposure to economic structures that are generally less diverse and mature and to political systems which have less stability than those of more developed countries.
Please refer to the Fund’s latest Key Investor Information Document and Prospectus before making any final investment decision. The latest English version of the prospectus and the KIID can be found at ssga.com.
A summary of investor rights can be found here: https://www.ssga.com/library-content/products/fund-docs/summary-of-investor-rights/ssga-spdr-investors-rights-summary.pdf
Note that the Management Company may decide to terminate the arrangements made for marketing and proceed with de-notification in compliance with Article 93a of Directive 2009/65/EC
Les ETF se négocient comme des actions, sont exposés au risque d’investissement et leur valeur boursière fluctue. Ils peuvent en outre se négocier à prime ou à décote par rapport à leur VL. Les frais de courtage et les coûts relatifs à l’ETF réduisent les performances.
IL EST POSSIBLE QUE LES SPDR ETF DE SSGA NE VOUS SOIENT PAS DISPONIBLES OU NE VOUS CONVIENNENT PAS. LES OPINIONS/INFORMATIONS PRÉSENTÉES SUR CE SITE NE SAURAIENT CONSTITUER UN CONSEIL EN INVESTISSEMENT OU UN CONSEIL D’ORDRE FINANCIER, JURIDIQUE, RÉGLEMENTAIRE, COMPTABLE OU FISCAL. EN CAS DE DOUTE, DEMANDEZ L'AVIS D'UN CONSEILLER INDÉPENDANT. LES INFORMATIONS ET OPINIONS PRÉSENTÉES SUR CE SITE NE SAURAIENT CONSTITUER UNE SOLLICITATION OU UNE OFFRE D’ACHAT OU DE VENTE DE PARTS DES FONDS OU DE TOUT AUTRE INSTRUMENT FINANCIER.
Standard & Poor’s®, S&P® et SPDR® sont des marques déposées de Standard & Poor’s Financial Services LLC (S&P) ; Dow Jones est une marque déposée de Dow Jones Trademark Holdings LLC (Dow Jones). Ces marques ont été accordées sous forme de licence par S&P Dow Jones Indices LLC (SPDJI) et de sous-licence pour certaines utilisations par State Street Corporation. Les produits financiers de State Street Corporation ne sont ni parrainés, ni promus, ni vendus par SPDJI, Dow Jones, S&P, leurs sociétés affiliées respectives et leurs tiers concédants de licence. Aucune de ces parties ne fait de déclaration quant à l’opportunité d’investir dans ce(s) produit(s). Par ailleurs, elles déclinent toute responsabilité à ce sujet, y compris pour toute erreur, omission ou interruption affectant un indice.
Les SPDR ETF ne peuvent être offerts et vendus que dans les juridictions où cela est autorisé conformément aux dispositions légales en vigueur.
Informations relatives au Mexique
Les informations figurant dans ce document ne constituent en aucun cas une offre de titres financiers et ne sauraient être considérées comme telles. Les Fonds mentionnés dans ce document ne sont et ne seront pas agréés en vertu de la Mexican Securities Market Law (Ley del Mercado de Valores). Ils ne peuvent faire l’objet d’aucune offre publique, pas plus qu’ils ne peuvent être vendus sur le territoire des États-Unis d’Amérique. Il est interdit de distribuer publiquement les documents informatifs liés aux fonds susmentionnés sur le territoire du Mexique, tout comme il est interdit d’y échanger des parts des Fonds.
OPCVM SPDR ETFs
SPDR ETFs Europe I Plc et SSGA SPDR ETFs Europe II Plc émettent les ETF SPDR et sont une société d’investissement à capital variable et à compartiments assortis d’une responsabilité séparée. La Société est structurée comme un Organisme de placement collectif en valeurs mobilières (OPCVM) conformément à la législation irlandaise et agréée en qualité d’OPCVM par la Banque centrale d’Irlande.
Ce site web s'adresse uniquement aux investisseurs qualifiés, tels que définis par l'article 10 (3) et (3ter), de la loi suisse sur les placements collectifs de capitaux (« LPCC ») et son ordonnance d'application. Certains fonds peuvent ne pas être enregistrés pour la distribution publique auprès de l'Autorité fédérale de surveillance des marchés financiers (FINMA), qui agit en tant qu'autorité de surveillance en matière de fonds de placement, ou peuvent ne pas avoir désigné de représentant et d'agent payeur suisse. Pour les fonds qui ont désigné un représentant et un agent payeur, les investisseurs intéressés peuvent obtenir les prospectus, les statuts, les DICI ainsi que les derniers rapports annuels ou semestriels disponibles gratuitement auprès du représentant et agent payeur suisse, State Street Bank International GmbH, Munich, succursale de Zurich, Beethovenstrasse 19, 8027 Zurich, ou sur le site https://www.ssga.com, ainsi qu’auprès du distributeur principal en Suisse, State Street Global Advisors AG (« SSGA AG »), Beethovenstrasse 19, 8027 Zurich. Pour les fonds qui n'ont pas désigné de représentant ni d'agent payeur en Suisse, veuillez noter que les fonds sont ouverts aux investisseurs qualifiés, à l'exclusion des investisseurs qualifiés bénéficiant d'une clause d'exclusion (« opting-out ») conformément à l'art. 5(1) de la loi fédérale suisse sur les services financiers (« FinSA ») et sans aucune relation de gestion de portefeuille ou de conseil avec un intermédiaire financier conformément à l'article 10(3ter) de la LPCC (« Investisseurs Qualifiés Exclus »). Pour obtenir plus d'informations et les documents relatifs au fonds, veuillez contacter SSGA AG.
Vous devez vous procurer et lire le prospectus et le document d'information clé pour l'investisseur (DICI) de SPDR avant d’investir. Ils sont disponibles en cliquant ici. Ceux-ci comprennent des informations complémentaires concernant les fonds SPDR, y compris des informations relatives aux coûts, aux risques et où les fonds sont autorisés à la vente.
ETFs SPDR américains
La distribution des intérêts des ETF SPDR américains en Suisse sera exclusivement faite à des investisseurs qualifiés et s'adressera uniquement à ceux-ci, tels que définis par l'article 10(3) et (3ter), de la loi suisse sur les placements collectifs de capitaux (« LPCC ») et son ordonnance d'application. Par conséquent, les ETF SPDR américains ne sont pas enregistrés pour une distribution publique auprès de l'Autorité fédérale de surveillance des marchés financiers (« FINMA »). Certains fonds peuvent ne pas avoir désigné de représentant et d'agent payeur suisse. Pour les fonds avec un représentant et un agent payeur suisse, les investisseurs intéressés peuvent obtenir les documents juridiques liés aux ETFs SPDR américains gratuitement auprès du représentant et agent payeur suisse, State Street Bank International GmbH, Munich, succursale de Zurich, Beethovenstrasse 19, 8027 Zurich, ou sur le site https://www.ssga.com, ainsi qu’auprès du distributeur principal en Suisse, State Street Global Advisors AG (« SSGA AG »), Beethovenstrasse 19, 8027 Zurich. Pour les fonds sans représentant ni agent payeur suisse, veuillez noter que les fonds sont ouverts aux investisseurs qualifiés, à l'exclusion des investisseurs qualifiés ayant une clause d’exclusion (« opting-out ») conformément à l'art. 5(1) de la loi fédérale suisse sur les services financiers (« FinSA ») et sans relation de gestion de portefeuille ou de conseil avec un intermédiaire financier conformément à l'article 10 (3ter) de la LPCC (« Investisseurs Qualifiés Exclus »). Pour obtenir plus d'informations et les documents relatifs au fonds, veuillez contacter SSGA AG.
Avant d’investir, il convient d’analyser les objectifs d’investissement, les risques, les frais et les dépenses des fonds. Pour obtenir un prospectus contenant ces informations et d'autres, téléchargez le ici ou adressez-vous à votre conseiller financier. Lisez-le attentivement avant d'investir.