Axa's Lamirel: Bonds face value erosion from rates and sovereign risk

Sovereign credit risk and a rise in interest rates could threaten the credit market by impacting the cost of funding companies and eroding the value of bonds, says Julie Lamirel at Axa Investment Managers.

The manager of Axa Sterling Bond does not believe there is a bubble in credit, given the discipline of the companies in which the fund invests. “We recognise exogenous risks: sovereign credit risk which impacts the cost of funding of those companies, and the rise in rates, which will erode, rather than cut the value of bonds,” she says. Despite these potential risks, the current low growth environment is favourable for the asset class, she adds. “Companies have remained disciplined, focusing on cashflow generation, banks have been able to reduce their risk profile and extend their ...