Challenging conditions returned in December after a brief period of bounty in November for global fund managers. Longer-term US Treasury bond yields finished the month moderately higher, as did yields in the UK and major euro-zone economies. The Aussie dollar was stronger against the USD, euro, sterling and yen. 16 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 December was -0.03% (November: 0.19%) while the median return over the 12 months including December came to -0.95% (November: -0.95%). The Barclays Global Aggregate Bond Index, a widely-used index in this sector, returned -0.51% in December and -1.91% over the rolling year (when hedged into Australian dollars).
In US markets, the 2-year Treasury yield gained 17bps to 0.73% over the month while the 10-year yield added 6bps to 1.51% and the 30-year yield gained 11bps to 1.90%. BBB spreads tightened modestly.
In other major bond markets, the German 10-year bond yield gained 16bps to -0.18% and the French 10-year increased by 17bps to +0.20%. The 10-year UK gilt yield finished the month 14bps higher at 0.91%.
The best performing global fund for the month in the YieldReport December survey was Legg Mason Western Asset Macro Opportunities Bond Fund. It produced a return of +2.08% for the month following a near “worst-in-class” return of -1.66% in November and a second-quartile return of -0.39% in October.
The second-highest return was produced by the Bentham Wholesale High Yield Fund. Its return of +1.52% followed a bottom-quartile return of -0.44% in November and a third-quartile return of -0.60% in October.
In terms of fund performance for the twelve months to the end of December, the Invesco Wholesale Senior Secured Income Fund retained its title as the highest performing fund for a tenth consecutive month. The Invesco fund produced a 12-month return of 7.90%, while the Bentham Professional Syndicated Loan Fund was next after it produced a 12-month return of 5.18%.
| GLOBAL BOND FUNDS | ASX mFund | 1m (%) | 3m (%) | 1y (%) | 3y (%) | 5y (%) |
|---|---|---|---|---|---|---|
| Advance International Fixed Interest Multi-Blend | -0.18 | -0.50 | -2.60 | 2.80 | 2.03 | |
| Alpha Diversified Income | mFund | n/a | n/a | 0.06 | 1.78 | 1.77 |
| AMP Future Directions International Bond Fund | -0.49 | -0.49 | -3.30 | 2.66 | 2.25 | |
| AMP Capital International Bond | -0.44 | -0.37 | -2.79 | 3.19 | 2.78 | |
| ANZ-CFS Global Credit Income EF | 0.14 | -0.62 | 0.26 | 0.77 | 0.63 | |
| Ardea Real Outcome Fund | 0.42 | -0.19 | -0.60 | 4.46 | 4.26 | |
| Bentham Professional Global Income | mFund | 0.70 | 0.65 | 4.62 | 4.53 | 4.47 |
| Bentham Wholesale High Yield | mFund | 1.52 | 0.47 | 4.65 | 6.27 | 5.00 |
| Bentham Syndicated Loan ASX Class | mFund | 0.69 | 0.76 | 5.18 | 3.79 | 3.65 |
| Kapstream Wholesale Absolute Return Income | mFund | 0.12 | -0.23 | 0.02 | 1.62 | 2.08 |
| BlackRock Wholesale International Bond | -0.21 | 0.07 | -1.45 | 4.12 | 3.37 | |
| Pendal Enhanced Global Fixed Interest (Wholesale) | n/a | -1.31 | -4.33 | 2.45 | 2.20 | |
| CFS Wholesale Global Corporate Bond | 0.00 | -0.01 | -2.04 | 6.04 | 4.47 | |
| Dimensional Five-Year Diversified Fixed Interest | -0.15 | -1.49 | -1.56 | 0.92 | 1.40 | |
| Dimensional Global Bond Trust | -0.11 | -0.16 | -2.50 | 4.18 | 3.56 | |
| Dimensional Two-Year Diversified Fixed Interest | 0.04 | -0.73 | -0.81 | 0.90 | 1.20 | |
| Franklin Templeton Global Aggregate Bond Fund (W Class) | -0.05 | -1.07 | -3.49 | 3.57 | 2.62 | |
| Franklin Templeton Multisector Bond (Institutional) | 1.17 | -1.35 | -5.16 | -4.82 | -2.39 | |
| Invesco Wholesale Senior Secured Income | mFund | 0.37 | 0.52 | 7.90 | 5.01 | 3.80 |
| Legg Mason Brandywine Global Opp Fixed Income A | mFund | 0.43 | 0.51 | -0.86 | 4.63 | 3.55 |
| Legg Mason Western Asset Global Bond Fund | 0.21 | -0.10 | -1.49 | 4.57 | 3.97 | |
| Legg Mason Western Asset Macro Opportunities Bond Fund | 2.08 | -0.01 | -0.91 | 6.60 | 5.58 | |
| Macquarie Global Income Opportunities Fund | 0.41 | -0.37 | 0.41 | 3.42 | 3.07 | |
| Macquarie Core Australian Fixed Interest Plus Fund | -0.04 | -1.66 | -2.33 | 4.48 | 4.33 | |
| Mercer Global Credit Fund | -0.02 | -0.27 | -1.25 | 5.07 | 3.87 | |
| Mercer Global Sovereign Bond Fund | -0.65 | -0.26 | -2.67 | 3.56 | 3.58 | |
| Omega Global Corporate Bond | n/a | -3.29 | -6.22 | 2.43 | 2.35 | |
| PIMCO Global Bond (Wholesale) | mFund | -0.12 | -0.28 | -1.37 | 4.12 | 3.62 |
| PIMCO Global Credi (Wholesale) | mFund | -0.09 | -0.25 | -0.67 | 4.15 | 3.55 |
| PIMCO Diversified Fixed Interest Wholesale | mFund | 0.11 | -0.91 | -2.34 | 3.49 | 3.37 |
| PIMCO Unconstrained Bond (Wholesale) | mFund | 0.37 | -0.84 | -0.09 | 2.81 | 2.95 |
| State Street SSgA Global Fixed Income Trust | -0.96 | 0.12 | -2.40 | 3.17 | 2.84 | |
| T.Rowe Price Dynamic Global Bond Fund | -0.34 | -2.44 | -1.09 | 2.19 | 1.53 | |
| UBS Global Credit Fund | -0.10 | -0.46 | -1.50 | 6.00 | 4.41 | |
| UBS International Bond | -0.30 | -0.38 | -1.64 | 3.51 | 3.09 | |
| Vanguard International Credit Securities Index (Hedged) | -0.24 | -0.04 | -1.54 | 4.54 | 3.71 | |
| Vanguard International Fixed Interest Index (Hedged) | -0.99 | -0.02 | -2.57 | 2.71 | 2.61 |