Q3 2019 Charts and Views Ultra dovish Central Banks put fixed income investing back to the core Investment Insights | Market Stories

Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry Fixed income back to the core: Search for yield, flexibility, and ESG are major themes

A slowdown in global growth, with subdued inflation and dovish central banks (CB) committed to avoiding further economic deceleration, is a trend that, in our view, should remain favourable for bond investors. On one side, this should limit the upside in core bond yields and, on the other, support the credit market, although we are aware that the spread compression in this first part of the year has been very strong and that an increasingly selective approach will be crucial to exploiting pockets of value.

Other dominant factors within the fixed income environment are the increased role of politics, the still present -term downside risks regarding the economy, the high level of debt globally, and, moving towards the long term, rising acknowledgment of climate and societal-related risks.

Against this backdrop, rethinking fixed income investments as a core part of investors’ portfolios is Eric Brard crucial both to deliver attractive risk/adjusted returns and to seek protection and effective diversification Head of Fixed Income in phases of market turmoil.

We identify three recurring themes for investors: . The search for yield further emphasised by the rally in core bonds. . The need to embrace a flexible and diversified approach in a late phase of the cycle when sudden changes in market sentiment are more likely. . The emergence of ESG and climate change as key topics in portfolio construction.

This publication combines views from our global teams of portfolio managers, macro-economists, strategists and Investment Insights specialists with the aim of providing our ideas with regard to investing in fixed income markets for the months ahead. We hope you find the information helpful,

Eric Brard

Page 2 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry Fixed income markets in 2019

2018 vs YTD 2019 Performances 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% s s s s k k k k Y Y C C G G m m I I e e e e n n n n L i H H i i i 3 3 i i i i H

v v v v o S L L L L s o s h h r S o o o o . . . . r U e e s l l l s l u i U i f f f f u G G G G a a v E v n n n n E I I I I C C o n o S U K

a . G o U o U S G S K M

r p r p U U E U a u u M a M J E J E E E

Cash Govies Inflation Linkers Credit IG Credit HY EM

2018 YTD 2019

Source: Bloomberg, . Data as of 17 July 2019. All indexes are total return in local currency. For the list of indices used in this chart, see notes at the end of the presentation. Past performance is no guarantee of future results.

Page 3 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry Table of contents

2. Fixed Income 1. Macro Themes 3. Conclusions Investor Needs

. Key macro themes 6 . Fixed income investor needs 14 . Conclusions 25 . Growth decelerating 7,8 . Search for yield 15-18 . Contributors 26 . Dovish Central Banks 9,10 . Flexibility and diversification 19-23 . References and definitions 27 . Geopolitical uncertainty 11 . ESG & climate change 24 . Long-term risks 12

Page 4 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry Macro themes

5 Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry 1. Macro 2. Fixed Income 3. Conclusions Themes Investor Needs

Key macro themes

KEY THEMES LONG-TERM FOCUS

GROWTH: DOWNSIDE CENTRAL BANKS DOMINANCE OF GLOBAL TRADE, RISKS, “BAZOOKA” READY POLITICS SET TO DEBT, CLIMATE NO RECESSION IN AGAIN REMAIN CHANGE 12 MONTHS

Economic slowdown CBs have returned to Some recent improvement Some challenges have to continued in Q2, and quality accommodative monetary (Italy, EU appointments, be monitored in the long of growth deteriorated policies. Reactive fine- trade talks), but the list of term: global trade retreat, (weaker investments, trade). tuning in speed and risks is still long: China - high/growing debt, CB “ policy”, magnitude US, Iran, Brexit, interference climate change risk fiscal/monetary expansion in CB policy and trade truce could help the economy to stabilize

Source: Amundi, as of 23 July 2019.

Page 6 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry 1. Macro 2. Fixed Income 3. Conclusions Themes Investor Needs

GROWTH Economic deceleration and low inflation

World GDP annual average growth rate, YoY average, % China Inflation CPI, YoY

Emerging d e Markets s t p e o k World DM l 2.0% 1.6% 1.8% r e a v e EM 6.6 M

6.2 D Developed US 6.1 Markets

g s

4.9 n Eurozone t i

4.6 e g

4.4 k r 3.9% 3.8% r 4.0%

DM EM e 3.8 a m M 3.3 3.4 E 2.9 2.4 2.2 1.9

1.8 1.8 d l

1.5 r

1.2 o 3.2% 3.0% 3.0% 1.0 W

8 9 0 8 9 0 8 9 0 8 9 0 8 9 0 8 9 0 2018 2019 2020 1 1 2 1 1 2 1 1 2 1 1 2 1 1 2 1 1 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2

Global growth is projected to slow down to 3.3% in 2019. Domestic demand is a key driver of growth while the external component, due to tariff increases, and the manufacturing sector are the weakest spots. According to our forecasts, the US economy should also decelerate in 2020 while there could be a slight reacceleration of growth in both EM and Europe moving towards 2020.

Source: Bloomberg, Amundi Research. Data as of 23 July 2019.

Page 7 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry 1. Macro 2. Fixed Income 3. Conclusions Themes Investor Needs CENTRAL BANKS A “pre-emptive” FED to prolong the cycle

ISM Manufacturing and the Fed in the '90s ISM Manufacturing and the Fed since 2007

6% 65 10% 60 9% 5% 60 8% 55 55 7% 4% I n I n d d 6% 50 50 e e x x

l

3% e 5% l e v v

45 e e l

4% 45 l 2% 3% European 40 Commodity Mexican Asian crisis 2% crisis 40 crisis crisis + 1% 35 1% LTCM 0% 35 0% 30

Recessions Fed Target Rate (lhs) Recessions Fed Target Rate (lhs) ISM Manufacturing PMI (rhs) ISM Manufacturing PMI (rhs)

manufacturing recession does not always mean a general recession. In the mid-1990s and in 1998, the Fed cut rates by 75 bps (as ISM was < 50) and eventually prolonged the cycle. Today, the has inversed, which means that the neutral rate has probably been reached. Given the deflationary risk (a big difference vs the 1990s), the Fed has decided to act in a more preventive manner.

Source: Bloomberg, Amundi Research. Data as of 23 July 2019. Source: Bloomberg, Amundi Research. Data as of 23 July 2019.

Page 8 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry 1. Macro 2. Fixed Income 3. Conclusions Themes Investor Needs

GROWTH Looking at the yield curve and PMI indicators

Yield curve inversion and US recessions US PMI indicators 400 62 350 300 60 ) s p 250 58 b ( l

a 200 i t 56 n e

150 x r e e f d 54 f i 100 n I d d l 50 52 e i Y 0 50 -50 48 -100 46 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Recession Yield Spread between 5-year and 30-year Treasuries PMI Manufacturing PMI Non-Manufacturing Yield Spread between 3-month and 10-year Treasuries ISM Danger Zone

Rising concerns over the US economic outlook, mainly due to the weakening manufacturing sector, have pushed the yield differentials between three-month and 10-year yields below zero for the first time since 2007 ‒ in a pattern that in the past had anticipated future recessions.

Source: Bloomberg, Amundi. Data as of 12 July 2019. Source: Bloomberg, Amundi. Data as of 12 July 2019.

Page 9 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry 1. Macro 2. Fixed Income 3. Conclusions Themes Investor Needs CENTRAL BANKS Central Banks dovish across the board

Nominal Central Banks' Rates Markets price Fed rate cuts 7 2.5% 6 2.4% 5

4 2.3% FOMC Jan. %

meeting

, March s 3 meeting e May t 2.2%

a meeting

R 2 2.1% 1 June meeting 2.0% 0 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 -1 7 8 9 0 1 2 3 4 5 6 7 8 9 0 0 0 1 1 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 Implied yield on August 2019 Fed funds future Fed ECB BoE BoJ Fed funds effective rate Fed Becoming even more dovish. We expect the 50bps of rate cuts by the end of 2019. ECB More easing to come. Reopening of QE (CSPP) and further rate cuts in case of “adverse contingencies”. BoE Chances of a rate cut occurring have increased, Brexit still an open question BoJ Easy monetary policy to be continued at least until 2020. A more accommodative stance in case of need. EM Central Banks: Softer stances from most EM central banks, given more benign inflation expectations and DM CB accommodative stances.

Source: Bloomberg, Amundi. Data as of 7 July 2019. US Fed: Federal Reserve; ECB: European Central Bank; BoE: Bank of England; BoJ: Bank of Japan.

Page 10 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry 1. Macro 2. Fixed Income 3. Conclusions Themes Investor Needs

POLITICS The dominance of politics: protectionism in the spotlight

Policy uncertainty 10 World trade 1000

900 8 800 700 6 x %

, e h d 600 t n I w

o 4

500 r g

400 Y o Y 2 300 200 0 100 0

0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 -2 0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 US Europe China Global Base Alternative

Global policy uncertainty increased overall in June, notwithstanding the US-China trade truce at the G-20 meeting. Global trade disputes, tensions in the Middle East, Brexit and European fragmentation remain in the spotlight. The most recent data are flagging that China policy support is beginning to take effect while trade disputes risk weigh on global trade.

Sources: Baker, Bloom & Davis, Amundi. Data available as of 07 July 2019. Policy uncertainty indicators based on archives from Access World New’s NewsBank. Source: CPB World Trade Monitor, Amundi. Data available as of 30 June 2019.

Page 11 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry 1. Macro 2. Fixed Income 3. Conclusions Themes Investor Needs LONG TERM Climate issues are perceived as major LT risks

Global risk landscape Failure of climate Extreme change mitigation / weather 4.0 Biodiversity adaptation events loss and ecosystem 3.8 collapse Natural disaster Man-made 3.6 t environmental c

a disasters p m i

3.4 l a i t n e t 3.2 o P

3.0

2.8 2.5 3.0 3.5 4.0 4.5 Likelihood Economic Environmental Geopolitical Societal Technological

For the next 10 years, climate and societal-related risks are among the top key concerns for investors.

Source: World Economic Forum Global Risks Perception Survey 2018–2019. Global Risks Perceptions survey is completed by around 1,000 members of WEF multi-stakeholder communities. Note: Survey respondents were asked to assess the likelihood of the individual global risk on a scale of 1 to 5, with 1 representing a risk that is very unlikely to happen and 5 a risk that is very likely to occur. Survey respondents also assessed the impact on each global risk on a scale of 1 to 5 (1: minimal impact, 2: minor impact, 3: moderate impact, 4: severe impact and 5: catastrophic impact).

Page 12 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry Fixed income investor needs

13 Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry 1. Macro 2. Fixed Income 3. Conclusions Themes Investor Needs

Fixed income investor needs Search for yield, flexibility/diversification and ESG at the forefront

Market themes and implications

Core bond Credit spread Interest To face late cycle and yields levels rates dynamics long-term risks

NEUTRAL SLIGHTLY POSITIVE FLEXIBLE SELECTIVE

Diversification and Search for yield ESG & climate change flexibility

Source: Amundi. Data as of 23 July 2019.

Page 14 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry 1. Macro 2. Fixed Income 3. Conclusions Themes Investor Needs

SEARCH FOR YIELD The search for yield is well alive

EMU Broad IG by Yield buckets Amount of negative-yielding debt 14 60 e

12 u 50 l a V

t

10 e k 40 r a n M o

i Only 12% of the IG l x l

l 8 e i

r 30 Euro broad bond d t

n

I market provides D

f S

6 o yield >1%

U

% 20 4 10 2 - 0 < 0% 0%-0.5% 0.5% -1% 1%-1.5% 1.5% -2% >=2% 2015 2016 2017 2018 2019 July 2018 July 2019 Bloomberg Barclays Global Aggregate Negative-Yielding Debt Index

With an uncertain economic outlook, high geopolitical risk and more dovish Central Banks, the amount of negative yielding bonds globally has reached a new record high (above USD 13Trillions). Hence, the search for yield continues to be a key theme for investors, especially in Europe where the yield levels remain subdued.

Source: Bloomberg, Amundi. Data as of 23 July 2019. Source: Bloomberg, Amundi. Data as of 19 July 2019. Anallysis based on the composition of the ICE BofAML Euro Broad Market Index.

Page 15 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry 1. Macro 2. Fixed Income 3. Conclusions Themes Investor Needs

SEARCH FOR YIELD Global credit opportunities in the search for yield

Credit spreads 220 800 US IG Euro IG US HY Euro HY 200 700 Macro

H = = = =

180 Y )

S s Monetary p p 600 r b e ( 160 policy ++ ++ ++ ++ a t d v o t o G

140 500 Fundamentals G o / t = = + = = o

v d t a 120 ( e b r 400

p Technicals p s

S = ++ = +

100 ) G I 300 Valuations 80 −/= =/+ − =

60 200 2016 2017 2018 2019

US IG EU IG US HY (rhs) EU HY (rhs)

Global credit markets still look to be an appealing source of carry, as we see some possible spread tightening thanks to more supportive CB policies. Fundamentals and technicals are also supportive for Euro credit, both IG and HY.

Source: Amundi Research and Amundi Fixed Income Platform. Source: Bloomberg, Amundi. Data as of 10 July 2019. Data as of 23 July 2019.

Page 16 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry 1. Macro 2. Fixed Income 3. Conclusions Themes Investor Needs

SEARCH FOR YIELD IG credit: Euro credit supported by CSPP

1000 Plenty of space for the ECB to re-open CSPP More attractive yields in financial subordinated

900 1.6

800

700 1.2 %

600 , t s 500 r o w

0.8

400 o t

d l

300 e i Y 200 0.4

100

0

5 6 7 8 9 0 1 1 1 1 1

0 0 0 0 0 AAA AA A BBB 2 2 2 2 2 Euro Corp Euro Financial Euro Financial Sub. CSPP Eligible universe (in EUR bn) ECB holdings (in EUR bn)

Investment-grade credit remains an attractive asset class for carry reasons, especially in Europe, where the sector could further benefit from supportive ECB policy (ie, CSPP). The ECB holds EUR 177bn of corporate bonds, close to 20% of the eligible universe. Investors could exploit selective opportunities at the sub-sector levels as well: for instance, in Euro subordinated financials offering attractive yields.

Source: Bloomberg, Amundi Research. Data as of 10 July 2019. CSPP=Corporate Source: Bloomberg, Amundi. Data as of 18 July 2019. ICE BofAML Indices. sector purchasing programme.

Page 17 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry 1. Macro 2. Fixed Income 3. Conclusions Themes Investor Needs

SEARCH FOR YIELD HY credit: benign default outlook, but be selective

Spread by rating - Euro HY vs US HY Default outlook 900 6.0%

800 5.0% d a e

r 700 p 4.0% S

d e

t 600 s

u 3.0% j d A

500 n o

i 2.0% t p 400 O 1.0% 300

0.0%

200 1 2 3 4 5 6 7 8 9 0 1 1 1 1 1 1 1 1 1 2

BB1 BB2 BB3 B1 B2 B3 CCC1 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 US HY Euro HY US Europe US modeled Europe modeled The default outlook for the high-yield market is still benign, with only mild increases likely in the next 12 months. Some caution is warranted in the highly indebted segments amid a global economic slowdown. Euro HY is better positioned than the US market in terms of yield and default outlook. Focus on selection and careful liquidity management.

Source: Bloomberg, Amundi. Data as of 11 July 2019. Source: Moody’s, elaboration by Amundi Research. As of 11 July 2019.

Page 18 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry 1. Macro 2. Fixed Income 3. Conclusions Themes Investor Needs

FLEXIBILITY/ DIVERSIFICATION Flexibility is key in a late phase of the cycle Time to actively rotate risk in the euro aggregate universe

End CB’s normalization & synchronized growth -> Short duration stance 2017 ─ CBs turn dovish ─ Europe renaissance faded: Trade war (weaker exports), ─ Repricing of risky assets & H1 ─ Attractive entry H2 signs of synchronized slower 2019 H1 Political developments (lack of reforms) points in credit, 2018 growth beware of short 2018 ─ Slower and unsynchronized growth & Resurgence of idiosyncratic risk -> Risk reduction since February ─ US dollar strength and UST duration call 170 strong issuance have weighed 1.0% on EM assets 160 0.8% s

d 150 a

e 0.6% r 140 B p u S 0.4% n 130 d d

e Y t 120 0.2% i s e u l j 110 d d

0.0% s A 100 s

n -0.2%

o 90 i t

p 80 -0.4% O 70 -0.6% Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Euro Corp IG (ls) Bund 10Y (rs)

As the cycle ages, the market starts to increase the probability of a future recession, with a concomitant negative impact on market sentiment. Although we believe there is still room for risky assets (credit), we suggest moderation in the deployment of risk budgets, given the price rally early this year and the global risks still on the rise. An active approach is needed to deal with sudden changes in risk sentiment typical of an aging cycle.

Source: Bloomberg, Amundi, as of 18 July 2019.

Page 19 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry 1. Macro 2. Fixed Income 3. Conclusions Themes Investor Needs

FLEXIBILITY/ DIVERSIFICATION Rethinking core bond allocation as a shock absorber during risk off phases

Asset class losses during major drawdowns for the S&P 500 Index

US Treasury 10-15 years US Aggregate Bond US HY EM Bond US Equity 40% 30% 20% d o i

r 10% e P 0% e h t -10% n i

s -20% s o L

/ -30% n i a -40% G -50% -60% Mar-00 / Sep-02 Oct-07 / Mar-09 Apr-11 / Oct-11 Nov-15 / Feb-16 Feb-18 Sep-18 / Dec-18

Internet bubble Great Financial Crisis Euro Crisis China slowdown Volatility spike Market correction

Investors in search of safe assets are looking at core bonds and high-quality bonds as diversifiers of risk assets during phases of market turmoil. As liquid assets, demand for them will likely continue to be strong.

Source: Bloomberg, Amundi, as of 13 July 2019.

Page 20 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry 1. Macro 2. Fixed Income 3. Conclusions Themes Investor Needs FLEXIBILITY/ DIVERSIFICATION Global bonds: core bond yields falling, play relative value

3.5% 2Y Government Yield

4.5% 10Y Government Yields 3.0% 4.0% 2.5% 3.5%

2.0% 3.0%

2.5% 1.5% 2.0%

1.0% 1.5%

0.5% 1.0% 0.5% 0.0% 0.0%

-0.5% -0.5%

-1.0% -1.0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2011 2012 2013 2014 2015 2016 2017 2018 2019

US Germany UK Japan US Germany UK Japan

Government bond yields across the world are falling, as there is strong demand for safe assets and scarce supply. Investors should consider core bonds for liquidity purposes and seek opportunities across the curve (steepening in US and flattening in the Euro curve).

Source: Bloomberg. Data as of 19 July 2019. Source: Bloomberg. Data as of 19 July 2019.

Page 21 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry 1. Macro 2. Fixed Income 3. Conclusions Themes Investor Needs FLEXIBILITY/ DIVERSIFICATION Euro bonds: opportunities at curve and country levels

10Y Govt bond spread vs Bund Yield Curves 4.0 400 3.5 350 3.0 300 )

s 2.5 p b (

250

) 2.0 d n % ( u

d B 200 1.5 l

e s i v

Y

d 150 1.0 a e r

p 0.5

S 100 0.0 50 -0.5

0 -1.0 2014 2015 2016 2017 2018 2019 0 5 10 15 20 25 30 Years to maturity Italy Spain Portugal France GERMANY ITALY SPAIN

Euro fixed income received strong support from the ECB’s new accommodative measures. This should benefit peripheral bond markets, which are favoured in the search for yield. Opportunities in curve appear to be flattening.

Source: Bloomberg, Amundi. Data as of 10 July 2019. Source: Bloomberg, Amundi. Data as of 10 July 2019.

Page 22 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry 1. Macro 2. Fixed Income 3. Conclusions Themes Investor Needs FLEXIBILITY/ DIVERSIFICATION Currencies: an area in which active investors can further diversify

EUR/USD and political risk G10 FX over/under valuations vs USD 1.50 120 5% 0.8% 1.45 135 0% 1.40 150

-1.2% R

-5% 1.35 165 e v e

-6.0% r

-6.7% 1.30 180 s

-10% -8.3% e

1.25 195 s -11.0% c a

-15% l -13.3% 1.20 210 e -20% -17.9% 1.15 225 Undervaluation -19.3% 1.10 240 -25% r r r c e a o n d 1.05 255 a a a r e n n n l l l n l l l u a o o Y u o o r o r r E o e

F 1.00 270 D D D K K

P

s

s d n n e n h 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 h s a a n a s n i i i s i i l i a a w l d t g d a i p a a r e e S r t a e n w B w s J

Z EUR/USD (lhs) a r

S u o C w A N

e European policy uncertainty index - trend (rhs) N

Political uncertainty in Europe and a dovish ECB tone are keeping downward pressure on the euro. Improving domestic growth as well as a better trade outlook should provide some relief to the European currency. Conversely, the USD is overvalued vs the entire G-10 universe.

Source: Bloomberg Amundi Research. Data as at 11 July 2019. Graphs shows current Over/Under valuations vs mid-term fair values. Fair value calculated as an average of different measures (productivity, Purchasing Power Parity, Real Effective Exchange Rate).

Page 23 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry 1. Macro 2. Fixed Income 3. Conclusions Themes Investor Needs

ESG & CLIMATE CHANGE Expanding green bond universe Growing market offering resulting in increase in diversified opportunity set

Barclays-MSCI Global Green Bond Universe $300 350

s 300 r $250 Other a l l o

d 250

f $200 Non-Fin o N

b

s Corporates

n

200 o o f i

l Financial i l $150 s i s b Corporates

u , 150 e e z s

i Government

s $100

t 100 Related e k r

a Treasuries $50 M 50

Nb of bonds $0 0 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Oct-18 Apr-19

For investors, green bonds offers similar market returns as compared to regular bonds, with higher transparency and a market that now is more developed and diversified. Investors pursuing a sustainable development focus can embrace green bonds as a way to finance Energy Transition projects. Green bonds are also attractive for investors with a 'pure' strategy.

Source: Amundi and Barclays, as of end of May 2019.

Page 24 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry 1. Macro 2. Fixed Income 3. Conclusions Themes Investor Needs

Conclusions

Key Investor needs How to play

− Explore yield opportunities in global credit markets Search for Yield − Look beyond traditional market segments: listed vs non-listed and liquid vs illiquid

− Adopt an unbiased and flexible approach to get the most from aggregate bond Flexibility and markets diversification − With anchored low yields, consider factor investing and/or rule based strategies to further diversify the alpha sources

ESG & Climate − On-board ESG and climate change in portfolio construction Change

Source: Amundi, as of 4 April 2019.

Page 25 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry Contributors Fixed Income Publications

FIXED INCOME PLATFORM H1 2019 Eric BRARD Date Title Head of Fixed Income European Elections: not a game changer, 28 May 19 opportunities from divergences Spain: forming a coalition will take time, but ECONOMIC AND STRATEGY RESEARCH 2 May 19 the picture looks benign for investors Didier BOROWSKI Monica DEFEND Is inflation definitely dead or simply dormant? Head of Macroeconomic Head of Strategy, Deputy Head 30 Apr 19 Research of Research Consequences for Central Banks Valentine AINOUZ Brexit update: recent stalemate leaves all Tristan Perrier 3 Apr 19 Senior Economist Credit Strategy options on the table Annalisa Usardi Sergio BERTONCINI Traditional and Alternative Factors in 11 Mar 19 Senior Economist Head of Rates & FX Research Investment Grade Corporate Bond Investing A dovish ECB, a little relief for the banking 8 Mar 19 sector INVESTMENT INSIGHTS UNIT European elections: five things to know and 5 Mar 19 Claudia BERTINO Giovanni LICCARDO market implications Head of Amundi Amundi Investment Insights Fed “quantitative tightening” is close to its end 4 Mar 19 Investment Insights Unit Unit God bless QE! Laura FIOROT Asset Class Views: Medium and long term Deputy Head of Amundi 27 Feb 19 expected returns Investment Insights Unit How investors should deal with the liquidity 25 Feb 19 CHIEF EDITORS dilemma Demand supports Italian debt issuance as Pascal BLANQUÉ Vincent MORTIER 4 Feb 19 primary markets move into the spotlight Chief Investment Officer Deputy Chief Investment Officer

Page 26 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry Indexes reference & definition

Fixed Income Market Indexes (pag. 3) Euro Cash 3m = JPMorgan Cash Euro 3M; USD Cash 3m = JPMorgan Cash USD 3M; EMU Govies = JPM GBI EMU in LOC; US Govies = JPM GBI US in LOC; Japan Govies = JPM GBI Japan in LOC; UK Govies = JPM GBI UK in LOC; Euro Infl. Link = Bloomberg Barclays Euro Govt Govt Inflation-Linked All Maturities; US Infl. Link = Bloomberg Barclays US Govt Inflation-Linked All Maturities; Jap. Infl. Link = Bloomberg Barclays Japan Govt Inflation-Linked All Maturities; UK Infl. Link = Bloomberg Barclays UK Govt Inflation-Linked All Maturities; Euro IG = ICE BofAML Euro Corporate; US IG = ICE BofAML US Corporate; Euro HY = ICE BofAML Euro High Yield; US HY = ICE BofAML US High Yield; EM Govies HC = JPMorgan EMBI Global Composite; EM Govies LC = J.P. Morgan GBI-EM Global Composite LOC.

Definitions . Basis points: one basis point is a unit of measure equal to one one-hundredth of one percentage point (0.01%). . Correlation: The degree of association between two variables; in finance, it is the degree to which assets or asset class prices have moved in relation to each other. Correlation is expressed by a correlation coefficient that ranges from -1 (perfectly negative correlated) through 0 (absolutely independent) to 1 (perfectly positive correlated). . Credit spread: differential between the yield on a credit bond and the Treasury yield. The option-adjusted spread is a measure of the spread adjusted to take into consideration possible embedded options. . Duration: a measure of the sensitivity of the price (the value of principal) of a fixed income investment to a change in interest rates, expressed as a number of years. . FX: FX markets refer to the foreign exchange markets where participants are able to buy and sell currencies. . Volatility is a statistical measure of the dispersion of returns for a given security or market index. Usually, the higher the volatility, the riskier the security/market. • Alpha measures risk-adjusted performance, representing excess return relative to the return of the benchmark. A positive alpha suggests risk-adjusted value added by the manager versus the index.

Page 27 I Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry Important Information

Unless otherwise stated, all information contained in this document is from Amundi Asset Management and is as of 19 July 2019.

The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. (www.mscibarra.com).

Diversification does not guarantee a profit or protect against a loss.

In the European Union, this document is only for the attention of “Professional” investors as defi ned in Directive 2004/39/EC dated 21 April 2004 on markets in fi nancial instruments (“MIFID”), to investment services providers and any other professional of the fi nancial industry, and as the case may be in each local regulations and, as far as the o ering in Switzerland is concerned, a “Qualifi ed Investor” within the meaning of the provisions of the Swiss Collective Investment Schemes Act of 23 June 2006 (CISA), the Swiss Collective Investment Schemes Ordinance of 22 November 2006 (CISO) and the FINMA’s Circular 08/8 on Public Advertising under the Collective Investment Schemes legislation of 20 November 2008. In no event may this material be distributed in the European Union to non “Professional” investors as defi ned in the MIFID or in each local regulation, or in Switzerland to investors who do not comply with the defi nition of “qualifi ed investors” as defi ned in the applicable legislation and regulation. This document is not intended for citizens or residents of the United States of America or to any «U.S. Person» , as this term is defi ned in SEC Regulation under the U.S. Securities Act of 1933. This document neither constitutes an o er to buy nor a solicitation to sell a product, and shall not be considered as an unlawful solicitation or an investment advice. Amundi accepts no liability whatsoever, whether direct or indirect, that may arise from the use of information contained in this material. Amundi can in no way be held responsible for any decision or investment made on the basis of information contained in this material. The information contained in this document is disclosed to you on a confidential basis and shall not be copied, reproduced, modified, translated or distributed without the prior written approval of Amundi, to any third person or entity in any country or jurisdiction which would subject Amundi or any of “the Funds”, to any registration requirements within these jurisdictions or where it might be considered as unlawful. Accordingly, this material is for distribution solely in jurisdictions where permitted and to persons who may receive it without breaching applicable legal or regulatory requirements. The information contained in this document is deemed accurate as at the date of publication set out on the first page of this document. Data, opinions and estimates may be changed without notice.

You have the right to receive information about the personal information we hold on you. You can obtain a copy of the information we hold on you by sending an email to [email protected]. If you are concerned that any of the information we hold on you is incorrect, please contact us at [email protected] Document issued by Amundi Asset Management, “société par actions simplifi ée”- SAS with a capital of €1,086,262,605 – Portfolio manager regulated by the AMF under number GP04000036 – Head office: 90 boulevard Pasteur – 75015 Paris – France – 437 574 452 RCS Paris – www.amundi.com.

Date of First Use: 24 July 2019.

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