Conditions facing global fund managers in May were trying to say the least. Long-term US Treasury bond yields finished the month moderately higher. Yields in major euro-zone countries declined but UK yields moved noticeably higher. The Aussie dollar was weaker against the USD and sterling but stronger against the euro and the yen. Only 6 of the 31 funds in the YieldReport survey finished the month with a positive return.
The median 1 month performance in the YieldReport survey of global bond funds in May was -0.68% (April: 0.40%) while the median return over the 12 months including May came to -3.37% (April: -1.75%). The Barclays Global Aggregate Bond Index, a widely-used index in this sector, returned -0.68% over the month and -3.37% over the rolling year (when hedged into Australian dollars).
In US markets, the 2-year Treasury yield gained 41bps to 4.41% over the month, the 10-year yield added 23bps to 3.65% while the 30-year yield finished 18bps higher at 3.66%. BBB corporate spreads widened a touch.
In other major bond markets, the German 10-year bund yield lost 9bps to 2.27% while the French 10-year OAT yield also lost 9bps to 2.84%. The 10-year UK gilt yield finished the month 46bps higher at 4.31%.
The best performing global fund for the month in the YieldReport May survey was the Invesco Wholesale Senior Secured Income Fund. It produced a return of 0.56% for the month, following a top quartile return of 0.80% in April and a worst-in-class performance of -0.67% in March.
The second-highest return for the month was produced by the Kapstream Wholesale Absolute Return Income. Its return of 1.43% followed a near-median performance of 0.39% in April and a fourth-quartile return of 0.18% in March.
In terms of fund performance for the twelve months to the end of May, the Ardea Real Outcome Fund took back the titles of highest performing fund from the Western Asset Macro Opportunities Bond Fund. The Ardea fund produced a 12-month return of 3.42% while the Invesco Wholesale Senior Secured Income Fund moved in second place with a 12-month return of 3.16%.
| GLOBAL BOND FUNDS | ASX mFund | 1m (%) | 3m (%) | 1y (%) | 3y (%) | 5y (%) |
|---|---|---|---|---|---|---|
| Advance International Fixed Interest Multi-Blend | -0.82 | 1.00 | -3.71 | -3.71 | -0.72 | |
| AMP Capital International Bond | n/a | 2.16 | -2.69 | -4.21 | -0.38 | |
| ANZ-CFS Global Credit Income EF | 0.10 | 0.61 | 2.21 | 1.03 | 0.07 | |
| Ardea Real Outcome Fund | -0.17 | 2.76 | 3.42 | 2.10 | 3.68 | |
| Bentham Professional Global Income | mFund | -1.71 | -0.32 | 1.39 | 5.12 | 2.85 |
| Bentham Wholesale High Yield | mFund | -0.28 | 2.51 | 0.88 | 2.89 | 1.97 |
| Bentham Syndicated Loan ASX Class | mFund | -0.14 | 0.64 | 2.92 | 5.36 | 2.00 |
| Kapstream Wholesale Absolute Return Income | mFund | 0.27 | 0.85 | 2.33 | 1.26 | 1.48 |
| CFS Wholesale Global Corporate Bond | -1.21 | 1.98 | -2.98 | -3.63 | 0.61 | |
| Dimensional Five-Year Diversified Fixed Interest | 0.00 | 1.34 | 0.43 | -1.97 | -0.15 | |
| Dimensional Global Bond Trust | -0.66 | 2.09 | -2.97 | -4.10 | -0.03 | |
| Dimensional Two-Year Diversified Fixed Interest | 0.07 | 1.12 | 0.94 | -0.59 | 0.51 | |
| Franklin Templeton Global Aggregate Bond Fund (W Class) | -0.58 | 1.89 | -0.28 | -2.83 | 0.64 | |
| Invesco Wholesale Senior Secured Income | mFund | 0.56 | 0.69 | 3.16 | 6.26 | 2.56 |
| Legg Mason Brandywine Global Opp Fixed Income A | mFund | -0.47 | 3.10 | -3.54 | -0.29 | 0.60 |
| Legg Mason Western Asset Global Bond Fund | -1.15 | 1.92 | -4.04 | -3.27 | 0.08 | |
| Legg Mason Western Asset Macro Opportunities Bond Fund | -2.02 | 2.54 | 2.01 | -4.01 | -0.69 | |
| Macquarie Global Income Opportunities Fund | -0.54 | 0.96 | 1.56 | 0.88 | 1.51 | |
| Macquarie Core Australian Fixed Interest Plus Fund | -1.65 | 2.15 | 1.35 | -2.87 | 1.14 | |
| Mercer Global Credit Fund | -0.84 | 1.44 | -3.50 | -3.22 | 0.18 | |
| Mercer Global Sovereign Bond Fund | -0.74 | 0.98 | -2.45 | -2.99 | 0.92 | |
| PIMCO Global Bond (Wholesale) | mFund | -0.64 | 1.10 | -3.03 | -2.46 | 0.30 |
| PIMCO Global Credi (Wholesale) | mFund | -0.58 | 1.23 | -3.08 | -2.63 | 0.17 |
| PIMCO Diversified Fixed Interest Wholesale | mFund | -0.90 | 1.49 | -0.65 | -2.55 | 0.54 |
| PIMCO Unconstrained Bond (Wholesale) | mFund | 0.03 | 0.90 | -2.50 | -0.62 | 0.17 |
| State Street SSgA Global Fixed Income Trust | -0.51 | 2.23 | -4.19 | -4.68 | -0.36 | |
| T.Rowe Price Dynamic Global Bond Fund | -1.79 | -1.56 | -1.78 | 1.61 | 2.28 | |
| UBS Global Credit Fund | -1.03 | 1.43 | -3.25 | -3.49 | 0.41 | |
| UBS International Bond | -0.73 | 1.51 | -2.83 | -3.30 | 0.06 | |
| Vanguard International Credit Securities Index (Hedged) | -0.89 | 1.73 | -3.17 | -3.50 | 0.01 | |
| Vanguard International Fixed Interest Index (Hedged) | -0.56 | 2.09 | -3.27 | -4.29 | -0.28 |
*End of May 2023. Return in AUD after fees