How distant seem the days when investors' attention was focused entirely on monetary policy developments and their macroeconomic consequences on both sides of the Atlantic... March has provided striking evidence that Donald Trump's return to business and its implications continue, directly or indirectly, to confuse investors' traditional thinking and fuel market volatility, much more so than the decisions of central bankers. For while the main factor driving credit markets and, even more so, interest rates has been the German Parliament's decision to relax the constitutional constraint on the country's borrowing capacity, how can we ignore the fact that this decision, which was necessary given the weaknesses of the German economic model exposed by the successive crises of the post-COVID era, was all the more rapid given the shadow cast over Europe by a US administration eager to sweep away 70 years of shared history – a German decision that not only weighed heavily on interest rate movements over the period (with all European 10-year rates diverging by more than 30bp in line with the 33bp spread observed on the Bund) and should exert lasting upward pressure on all European long-term rates. Once again, it is the fears raised by the decisions and announcements of the new Trump administration, both domestically – as evidenced by growing fears that the US is entering stagflation – and internationally – with the announcement of a “Liberation Day” for April 2 – that we can find the determinants of the negative trend in credit spreads (over the period, the X-Over widened by 35bp excluding roll-related skew). With all these factors pointing in the same direction, it is not surprising that all market segments posted negative performances over the period, although the riskiest categories outperformed, thanks to the partial absorption of rate movements by the credit spread cushion and the containment of macroeconomic and tariff fears towards the end of the month.The iBoxx Sovereign once again posted the weakest performance at -1.81% over the month, while the iBoxx HY limited its loss to -0.96% and the iBoxx Hybrids to -0.85%.

In this context, the Octo Crédit Value fund posted a performance in line with its benchmark index this month. During the month, we increased the credit quality of the portfolio, with an average rating of BBB-. Indeed, uncertainty surrounding the upcoming announcement on US tariffs, coupled with relatively low credit premiums, is prompting us to exercise caution, given that the risk is no longer sufficiently remunerated, particularly for the riskiest bond categories (high yield and Coco, among others). This explains why we have further reduced our exposure to high yield corporate bonds and increased our cash and cash equivalent position.

At 4.85%, the portfolio's average yield to maturity remains well above market rates for an average maturity of 3.7 years – equivalent to a premium of 170 bps over the average BBB-rated bonds with the same maturity (source: Octo, Bloomberg).