September dominated by higher volatility and lower risk tolerance

07.10.2020
Financial markets saw higher volatility and lower risk tolerance in September.

The increased volatility was probably related to rising covid-19 cases Europe. The same trend was recorded when the number of case rose in the U.S. in June and July. Global equities lost 2.7% according to MSCI ACWI stated in local currencies. Translated into DKK, this was a decrease of 1.5%. Risk premiums (i.e. investor's reward for taking risk) rose on European corporate bonds. Credit spreads (i.e. the yield pick-up on investment in a corporate bond relative to a government bond) of European investment grade and high-yield bonds widened by 4 basis points and 26 basis points, respectively, in September. For the two assets, this led to excess returns of -0.1% and -0.8%, respectively, relative to comparable government bonds in the previous month. The Danish 10Y government bond yield fell marginally by -0.3% to -0.4% in September.

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