Can short duration still pay off in 2014?

Can short duration still pay off in 2014?

clock • 4 min read

In the face of static interest rates, short duration trades have not worked well so far this year, so should managers be avoiding them? Annabelle Williams reports.

Going short duration ahead of an expected rise in interest rates was a consensus trade among bond mangers last year. But despite two members of the Bank of England’s Monetary Policy Committee voting for a 25bps rate hike in August, any such rise is yet to appear. Consequently, holding short-duration bonds has not paid off. One of the highest profile casualties of holding short positions has been Old Mutual Global Investors’ Stewart Cowley. He has run negative duration positions in his Global Strategic Bond fund, but this has contributed to poor performance. The fund has fallen 4% this...

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