Six fixed income hot topics and how to trade them using the Saxo Platform

(2) How to trade the steepening of the U.S. Yield curve

What is it?

When one talks about the U.S. yield curve steepening, he's referring to the fact that long-term yields are rising faster than short-term. If yield rise, the price of the bonds fall.

How can I trade it on the Saxo Platform?

a. Sell the long part of the yield curve

In the Saxo Platform, one cannot short cash bonds. Thus, in order to sell the long part of the yield curve, it is necessary to use CFD ETFs. The ones available on the Platform are:

TLT - iShares USD Treasury Bond 20+yr UCITS ETF (USD)

TLH - iShares Barclays 10-20 Year Treasury Bond Fund (USD)

IEF - iShares USD Treasury Bond 7-10yr  ETF

(3) Create a buffer against rising interest rate by buying higher-yielding securities or ETFs

In this scenario, it is important to note that if interest rates rise, bonds' price will fall. Still, coupon income will create a buffer against falling prices.

You can find high yield bonds in the Saxo Platform by browsing by name or ISIN on the "find instrument" toolbar. You can also access an inspirational bind list by clicking on Research -> Bonds -> scroll down you will find "U.S. High Yield Bonds" or other categories.

In case you are looking for High yield ETCs they can refer to:

HYG - iShares iBoxx USD High Yield Corporate Bond

(4) How to hedge against inflation rising in the United States

If inflation rises, therefore it is necessary to seek inflation protection through Treasury Inflation securities.

a. Buy TIPS

b. Gain exposure to TIPS ETFs

TIP - iShares Barclays TIPS Bond Fund (USD)

TIPSA - iShares USD TIPS UCITS ETF (EUR)

LTPZ - PIMCO 15+ Year US TIPS Index (USD)

TIPS - PIMCO Broad U.S. TIPS Index Fund (USD)

(5) Take advantage of the ECB’s accommodative monetary policies

While in the U.S. Treasury yields will rise amid an increase of inflation expectations, in Europe, inflation will lag. Thus, we expect more accommodative monetary policy from the ECB. It will be supporting for Bond prices and will benefit securities that trade rich compared to peers as well as long durations

How can I trade it on the Saxo Platform?

a. Buy Long-term European sovereign bonds. Please find below a table with key European benchmarks and their ISIN number:

b. Buy long-term ETFs with exposure to European Sovereigns such as:

DBXG - Xtrackers II Eurozone Government Bond 25+ UCITS ETF

DBXF - Xtrackers II Eurozone Government Bond 15-30yr UCITS ETF

DBXB - Xtrackers II Eurozone Government Bond 7-10yr UCITS ETF

(6) Inflation rising in the United Kingdom

How can I trade it on the Saxo Platform?

a. Buy Inflation-Link Gilts

b. Buy Inflation-Link Gilt ETFs

GILI - Lyxor ETF iBoxx UK Gilt Inflation Linked (GBP)