(on 24.04.2025 by Abid Mukhtar, Portfolio Manager at Commodity Capital)
Beyond surface-level causes, one factor is proving especially influential:
While the weaker US dollar may be a factor, it contributes only marginally to the recent decline in bond prices. The main reason appears to be the increased uncertainty associated with the Trump administration and the unpredictability of its political direction.
The rise in yields on US government bonds this week—particularly on Wednesday—has led to a drop in bond prices, with longer-term bonds experiencing greater losses. Investors are clearly bracing for increased volatility in 2025 and are trying to anticipate the government's next steps.
Rising yields naturally lead to falling bond prices, which negatively affects existing bond portfolios and their valuations, as we've seen in our bond fund. For investors without existing bond holdings, this could represent an attractive buying opportunity. However, for already invested investors, the recent developments are less favorable.
This tension underscores the friction between former President Trump and US Federal Reserve Chairman Jerome Powell. Trump has been vocal in calling for interest rate cuts, hoping such measures would trigger a recovery in stock and bond markets. However, such a move is likely to have only temporary effects. If the government truly wants to restore market confidence, it must make its policy direction clearer and more consistent. Sudden changes in course and strategy only further unsettle investors, which is also evident in the markets.
The US dollar has long served as the world’s reserve currency, but this period of instability could prompt global investors to consider alternatives and possibly favor European investments or other regions perceived as more stable.
We expect a highly volatile bond market in the coming year, with sharp price increases and declines. In such an environment, timing transactions—especially for bond funds—is difficult. However, the underlying securities continue to pay interest, which is positive. For long-term investors, like our bond fund, the best strategy might be to hold positions until maturity or wait for a favorable price increase before exiting—though the timing of such a recovery remains uncertain. A bumpy ride lies ahead, and strategic patience will be key.
Our Structured Solution Resource Income Fund has historically offered a strong risk/reward profile and is suitable for conservative portfolios. Weaker days could be purposefully used to build positions.
We offer the following share classes in the “Structured Solution Resource Income Fund”:
- Private Investors (EUR): ISIN: LU1510784512 | WKN: A2AT4F
- Institutional Investors (EUR): ISIN: LU1858158972
- Institutional Investors (EUR) – Clean Share Class: ISIN: LU1858159194
The Commodity Capital AG team is happy to assist you with any questions at Tel. +41 78 661 3991 or by email at info@commodity-capital.com.
Legal Disclaimer: This content is for informational purposes only and does not constitute financial advice or an investment recommendation. Please consult a qualified financial advisor before making any investment decisions and review the official prospectus and key investor information document of the fund.