The median 1 month performance in the YieldReport survey of global bond funds was +0.46% (previously -0.19%) and the median return over the last 12 months was 3.00% (previously 1.73%).
October was kind to global bond funds except those with large U.S. exposures. An additional boost to fund returns came in the form of a weaker Australian dollar which managed to fall for a second month in a row against all major currencies. 34 of 42 funds in the YieldReport survey produced positive returns for the month.
Reports of more North Korean missile test drove yields lower as investors headed for the relative safety of bonds in the early stages of the month. Political uncertainty in Europe (Catalonia) added to investor demand for safe haven assets, as did the release of the FOMC minutes and U.S. September CPI figures. U.S September retail figures , stronger consumer sentiment and passage of the 2018 budget through the U.S. Senate sent U.S. yields higher while U.K yields dropped despite a headline inflation rate of 3.0%. Towards the end of the month, a dovish plan for European withdrawal of ECB bond purchases sent German yields lower while U.S yields also dropped despite higher-than-expected U.S third quarter GDP figures. September quarter PCE was in line with expectations but U.S. yields fell anyway.
By the end of the October U.S. yields were up a modest amount while European yields had lost anywhere from a few basis points in the U.K to nearly 30bps in “peripheral” markets. U.S. 10 year bond yields added 4bps to 2.37% while the yield on U.K 10 year gilts fell 3bps to 1.33%, German bund yields decreased by 10bps to 0.36%, French yields fell by 12bps to 0.62% and Italian yields dropped 29bps to 1.82% (most of which occurred in the last week).
The best performing global fund for October in the YieldReport survey was Bentham’s Professional Global Income fund. Its return of 1.01% follows a similar return in September (+1.05%) and a near worst-in-class result in August (-0.12%). The second-highest return of 0.88% was produced by PIMCO’s Diversified Fixed Interest Wholesale fund.
In terms of fund performance for the twelve months to October 2017, Bentham’s Wholesale High Yield fund took the honours with a return of 10.77%. This fund had 97.2% of its assets in high yield (sub investment grade) bonds and it has an interest rate (modified) duration of 3.95 and credit duration of 4.03.
GLOBAL BOND FUNDS
| GLOBAL BOND FUNDS | ASX mFund | 1m (%) | 3m (%) | 1y (%) | 3y (%) | 5y (%) |
|---|---|---|---|---|---|---|
| Advance International Fixed Interest Multi-Blend | 0.50 | 0.79 | 1.30 | 2.23 | 3.10 | |
| Alpha Diversified Income | mFund | 0.45 | 0.36 | 1.82 | 2.71 | 2.93 |
| AMP Future Directions International Bond Fund | 0.38 | 0.72 | 1.23 | 3.00 | 3.80 | |
| AMP Capital International Bond | n/a | 0.85 | 1.75 | 3.53 | 4.34 | |
| ANZ-CFS Global Credit Income EF | 0.47 | 0.80 | 4.53 | 2.81 | 3.71 | |
| Bentham Professional Global Income | mFund | 1.01 | 1.94 | 10.10 | 5.63 | 7.49 |
| Bentham Wholesale High Yield | mFund | 0.48 | 1.54 | 10.77 | 7.36 | 8.39 |
| Bentham Syndicated Loan ASX Class | mFund | 0.78 | 1.95 | 8.31 | 6.27 | 7.07 |
| Kapstream Wholesale Absolute Return Income | mFund | 0.44 | 0.87 | 3.11 | 3.14 | 3.71 |
| BlackRock Monthly Income | 0.75 | 1.36 | 5.93 | 4.00 | 6.07 | |
| BlackRock Wholesale International Bond | 0.21 | 0.84 | 2.37 | 4.37 | 5.21 | |
| BT Global Fixed Interest Wholesale | 0.28 | 0.55 | -0.20 | 3.55 | 4.23 | |
| BT Institutional Enhanced Global Fixed Interest | 0.30 | 0.60 | 0.00 | 3.74 | 4.41 | |
| CFS Wholesale Global Bond | 0.41 | 0.77 | 0.38 | 3.52 | 4.19 | |
| CFS Wholesale Global Corporate Bond | 0.76 | 1.31 | 4.64 | 5.23 | 5.94 | |
| Dimensional Five-Year Diversified Fixed Interest | 0.30 | 0.46 | 1.86 | 3.63 | 3.68 | |
| Dimensional Global Bond Trust | 0.74 | 1.09 | 2.34 | 4.94 | ||
| Dimensional Two-Year Diversified Fixed Interest | 0.16 | 0.30 | 1.92 | 2.36 | 2.66 | |
| Franklin Templeton Global Aggregate Bd W | -0.08 | 0.20 | -1.04 | 3.06 | ||
| Franklin Templeton Multisector Bond I | -0.43 | 0.84 | 7.14 | 1.63 | 4.45 | |
| GAM Absolute Return Bond (AU) | -0.36 | 0.34 | 5.61 | 3.51 | 3.52 | |
| Invesco Wholesale Senior Secured Income | mFund | 0.54 | 1.04 | 5.49 | 5.09 | 4.26 |
| Legg Mason Brandywine Global Opp Fixed Income A | mFund | -1.49 | -0.68 | 4.45 | 3.97 | 6.48 |
| Legg Mason Brandywine Global Fixed Income A | -1.43 | -0.89 | 4.42 | 3.53 | 5.95 | |
| Legg Mason Western Asset Global Bond Fund | 0.08 | 0.58 | ||||
| Legg Mason Western Asset Macro Opportunities Bond Fund | -0.96 | 0.57 | 10.75 | |||
| Macquarie Global Bond | 0.38 | 0.42 | -0.43 | 3.28 | 4.15 | |
| Macquarie Global Income Opportunities Fd | 0.68 | 1.08 | 4.78 | 3.30 | 3.87 | |
| Mercer Global Credit Fund | 0.67 | 0.90 | 3.40 | 4.79 | 5.45 | |
| Mercer Global Sovereign Bond Fund | 0.64 | 1.35 | 2.34 | 5.39 | 5.81 | |
| Nikko AM International Bond | 0.47 | 0.65 | 1.04 | 4.21 | 4.93 | |
| Omega Global Corporate Bond | 0.56 | 0.81 | 2.44 | 4.24 | 4.15 | |
| PIMCO Global Bond Wholesale | mFund | 0.51 | 1.43 | 4.03 | 5.53 | 5.62 |
| PIMCO Global Credi Wholesale | mFund | 0.49 | 1.17 | 3.85 | 5.13 | 5.32 |
| PIMCO Diversified Fixed Interest Wholesale | mFund | 0.88 | 1.14 | 2.89 | 4.72 | 4.79 |
| PIMCO Unconstrained Bond Wholesale | mFund | 0.29 | 1.36 | 5.73 | 3.61 | n/a |
| State Street SSgA Global Fixed Income | 0.46 | 0.93 | 0.79 | 3.46 | 4.41 | |
| T.Rowe Price Dynamic Global Bond Fund | -0.06 | 0.73 | 0.19 | 4.52 | ||
| Templeton Global Bond Plus W | -0.48 | 0.83 | 6.25 | 0.70 | 2.80 | |
| UBS Global Credit Fund | 0.69 | 1.44 | 4.63 | 5.23 | 5.47 | |
| UBS International Bond | 0.72 | 1.25 | 1.98 | 4.41 | 4.70 | |
| Vanguard International Credit Securities Index Hdg | 0.67 | 1.28 | 3.34 | 4.75 | 4.95 | |
| Vanguard International Fixed Interest Index Hdg | 0.52 | 0.83 | 0.78 | 4.28 | 4.83 |
*End of October 2017. Returns in AUD after fees.