1/22/24 8:37 AM - Lesezeit

Higher proportion of inflation-linked bonds.

Gutmann UpToDate


Expectations of future inflation have fallen. Several uncertainty factors nevertheless suggest adjustments to bond investments.

Inflation expectations for the coming years have fallen. However, we consider the probability of inflation falling to pre-pandemic levels to be low. For this reason, the proportion of inflation-linked bonds in Gutmann Portfolio Management has been increased from 6% to 10% of the bond allocation.

The rise in prices for goods and services has slowed in recent months. However, past inflation is not our only consideration. More importantly, we focus on expectations for the future. As evidenced by 10-year German inflation expectations, these too are declining. In this case, they have returned to 2% per year. Rather than surveys of market participants, we base this on prices traded in financial markets.

We assign a low probability to inflation declining further towards 1%-1.5% in 10 year breakeven rates - which in financial lingo refers to inflation expectations - as was the case before the pandemic. Some parameters have shifted that exert longer-term inflationary pressure. Just think of the increased geopolitical risks that are leading to "friends shoring", i.e. counteracting the efficiency of globalization. In addition, labor market shortages persist. Finally, the push towards renewable energies also carries a price tag, potentially fueling inflation.

Clemens Hansmann, head of Gutmann KAG’s bond team: “We are increasing our allocation of inflation-linked bonds at the current lower level of inflation expectations. However, the battle against inflation is not yet over as long as there are no surprisingly strong deflationary developments. It is possible that inflation will remain slightly above the central bank's 2% target due to structural forces such as persisting wage pressure and geopolitical fragmentation.”

Inflation-linked bonds buy today's inflation expectations. If these rise in the future, so-called linkers stand to benefit compared to conventional bonds. Robert Karas, Chief Investment Officer at Gutmann: “With this move, we are increasing the weighting of a segment trimmed since fall 2022 when it accounted for a high 14% of bonds. This does not change the duration of 4.7 years within the bond component. The proportion of corporate bonds will fall slightly from 34% to 32%.”

Please contact your relationship manager with any questions or to discuss your individual investments.


Disclaimer: This is a marketing communication. Investments in financial instruments are exposed to market risks. Past performance or forecasts are not reliable indicators for future performance. Tax treatment depends on each client's personal circumstances and may change in the future. Bank Gutmann AG hereby explicitly points out that this document is intended solely for personal use and for information only. Publishing, copying or transfer shall not be permitted without the consent of Bank Gutmann AG. The contents of this document have not been designed to meet the specific requirements of individual investors (desired return, tax situation, risk tolerance, etc.) but are of a general nature and reflect the current knowledge of the persons responsible for compiling the materials at the copy deadline. This document does not constitute an offer to buy or sell or a solicitation of an offer to buy or sell securities. The required data for disclosure in accordance with Section 25 Media Act is available on the following website: https://www.gutmann.at/en/about-gutmann

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