Conditions changed from “challenging” to “torrid” in January for global fund managers. Longer-term US Treasury bond yields finished the month significantly higher, as did yields in the UK. Yields in the major euro-zone economies also rose noticeably. The Aussie dollar was weaker against the USD, euro, sterling and yen, somewhat softening the effects of higher yields. Only 6 out of 34 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 January was -1.44% (December: -0.03%) while the median return over the 12 months including January came to -2.74% (December: -0.95%). The Barclays Global Aggregate Bond Index, a widely-used index in this sector, returned -1.86% over the month and -3.12% over the rolling year (when hedged into Australian dollars).
In US markets, the 2-year Treasury yield gained 45bps to 1.18% over the month while the 10-year yield added 27bps to 1.78% and the 30-year yield gained 21bps to 2.11%. BBB spreads widened moderately.
In other major bond markets, the German 10-year bond yield gained 15bps to -0.03% and the French 10-year increased by 17bps to +0.37%. The 10-year UK gilt yield finished the month 26bps higher at 1.17%.
The best performing global fund for the month in the YieldReport January survey was the T. Rowe Price Dynamic Global Bond Fund. It produced a return of +0.97% for the month following a near fourth-quartile return of -0.34% in December and a near “worst-in-class” return of -0.79% in November.
The second-highest return was produced by the Bentham Professional Global Income. Its return of +0.67% followed a top-quartile return of 0.70% in December and a fourth-quartile return of -0.60% in October.
In terms of fund performance for the twelve months to the end of January, the Invesco Wholesale Senior Secured Income Fund retained its title as the highest performing fund for an eleventh consecutive month. The Invesco fund produced a 12-month return of 6.27%, while the Bentham Professional Syndicated Loan Fund was again next after it produced a 12-month return of 4.32%.
| GLOBAL BOND FUNDS | ASX mFund | 1m (%) | 3m (%) | 1y (%) | 3y (%) | 5y (%) |
|---|---|---|---|---|---|---|
| Advance International Fixed Interest Multi-Blend | -1.44 | -1.45 | -3.35 | 1.91 | 1.79 | |
| Alpha Diversified Income | mFund | n/a | n/a | n/a | n/a | n/a |
| AMP Future Directions International Bond Fund | -1.81 | -1.71 | -4.28 | 1.70 | 1.91 | |
| AMP Capital International Bond | -1.77 | -1.58 | -3.78 | 2.23 | 2.44 | |
| ANZ-CFS Global Credit Income EF | -0.58 | -1.11 | -0.54 | 0.19 | 0.44 | |
| Ardea Real Outcome Fund | -0.24 | 0.26 | -0.96 | 4.17 | 4.18 | |
| Bentham Professional Global Income | mFund | 0.67 | 1.17 | 4.32 | 4.43 | 4.37 |
| Bentham Wholesale High Yield | mFund | -2.11 | -1.05 | 1.87 | 4.34 | 4.23 |
| Bentham Syndicated Loan ASX Class | mFund | 0.20 | 1.05 | 4.07 | 3.28 | 3.48 |
| Kapstream Wholesale Absolute Return Income | mFund | 0.03 | -0.04 | -0.05 | 1.52 | 2.02 |
| BlackRock Wholesale International Bond | -1.70 | -1.29 | -2.57 | 3.12 | 3.04 | |
| Pendal Enhanced Global Fixed Interest (Wholesale) | n/a | n/a | -3.41 | 2.31 | 2.32 | |
| CFS Wholesale Global Corporate Bond | -2.84 | -2.81 | -3.57 | 4.48 | 3.78 | |
| Dimensional Five-Year Diversified Fixed Interest | -1.21 | -0.84 | -2.80 | 0.34 | 1.09 | |
| Dimensional Global Bond Trust | -2.34 | -1.46 | -4.18 | 2.95 | 3.17 | |
| Dimensional Two-Year Diversified Fixed Interest | -0.51 | -0.25 | -1.38 | 0.61 | 1.05 | |
| Franklin Templeton Global Aggregate Bond Fund (W Class) | -1.48 | -1.69 | -4.11 | 2.48 | 2.56 | |
| Franklin Templeton Multisector Bond (Institutional) | 0.20 | -1.06 | -3.69 | -5.69 | -2.28 | |
| Invesco Wholesale Senior Secured Income | mFund | 0.39 | 0.79 | 6.27 | 4.40 | 3.77 |
| Legg Mason Brandywine Global Opp Fixed Income A | mFund | -0.26 | 0.50 | -0.29 | 3.43 | 3.33 |
| Legg Mason Western Asset Global Bond Fund | -1.64 | -1.72 | -2.43 | 3.53 | 3.63 | |
| Legg Mason Western Asset Macro Opportunities Bond Fund | -3.87 | -3.51 | -1.99 | 3.78 | 4.42 | |
| Macquarie Global Income Opportunities Fund | -0.39 | 0.28 | 0.04 | 2.81 | 2.85 | |
| Macquarie Core Australian Fixed Interest Plus Fund | -1.46 | 0.52 | -3.26 | 3.46 | 3.84 | |
| Mercer Global Credit Fund | -2.47 | -2.54 | -2.93 | 3.71 | 3.32 | |
| Mercer Global Sovereign Bond Fund | -1.44 | -1.30 | -3.12 | 2.81 | 3.52 | |
| Omega Global Corporate Bond | n/a | n/a | -5.26 | 2.16 | 2.33 | |
| PIMCO Global Bond (Wholesale) | mFund | -1.28 | -0.99 | -2.35 | 3.23 | 3.35 |
| PIMCO Global Credi (Wholesale) | mFund | -1.57 | -1.43 | -1.82 | 3.16 | 3.18 |
| PIMCO Diversified Fixed Interest Wholesale | mFund | -1.11 | 0.05 | -3.11 | 2.76 | 3.09 |
| PIMCO Unconstrained Bond (Wholesale) | mFund | -0.75 | -0.65 | -1.23 | 2.21 | 2.61 |
| State Street SSgA Global Fixed Income Trust | -1.57 | -1.32 | -3.23 | 2.33 | 2.65 | |
| T.Rowe Price Dynamic Global Bond Fund | 0.97 | 0.93 | 0.51 | 3.18 | 1.90 | |
| UBS Global Credit Fund | -2.63 | -2.63 | -3.18 | 4.34 | 3.80 | |
| UBS International Bond | -1.64 | -1.52 | -2.68 | 2.58 | 2.83 | |
| Vanguard International Credit Securities Index (Hedged) | -2.41 | -2.25 | -3.12 | 3.21 | 3.18 | |
| Vanguard International Fixed Interest Index (Hedged) | -1.40 | -1.24 | -3.27 | 1.93 | 2.44 |