Given our view that yields are likely to move higher, we continue to maintain our defensive position in bond portfolios with the portfolio durations shorter than their benchmarks. We remain overweight the corporate sector as creditworthiness remains good, however corporate yield spreads are not particularly attractive and therefore we believe it prudent to reduce corporate exposure.

Should the trade tensions continue to escalate, perhaps with the imposition of U.S. tariffs on auto imports, we may need to adjust both the portfolio durations (longer) and corporate sector allocation (lower).

With regard to the yield curve, we believe the flattening that has occurred in the last few months is overdone. Accordingly, we have structured portfolios to benefit from greater term differentials (i.e. a steepening of the yield curve).

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