Conditions in December proved to be quite reasonable for Australian investors in global bonds. Longer-term US Treasury bond yields finished the month moderately higher while 10-year sovereign yields in major euro-zone market either fell or returned to their respective starting points. UK 10-year gilt yields fell moderately. The Aussie dollar was several percent stronger against all major currencies. 36 of the 38 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 +0.41% (November: n/a) while the median return over the 12 months including December came to +5.29% (December: n/a). The Barclays Global Aggregate Bond Index, a widely-used index in this sector, returned 0.22% in December and +5.76% over the rolling year (when hedged into Australian dollars).
In US markets, the 2-year Treasury yield shed 2bps to 0.12% over the month while 10-year and 30-year yields each increased by 7bps to 0.92% and 1.65% respectively. BBB spreads tightened again.
In other major bond markets, the German 10-year bund yield finished unchanged at -0.57%, the French 10-year OAT yield slipped 1bp to -0.34% and the Italian 10-year government bond yield fell by 8bps to 0.54%. 10-year UK gilt yields finished the month 10bps lower at 0.20%.
The best performing global fund for the month in the YieldReport December survey was the Legg Mason Brandywine Global Opportunistic Fixed Income Fund. It produced a return of +2.06% for the month following a 4.11% return in November and a 0.88% in October.
The second-highest return was produced by the T. Rowe Price Dynamic Global Bond fund. Its return of +1.55% followed returns of +0.33% in November and +0.35% in October.
In terms of fund performance for the twelve months to the end of December 2020, CFS Wholesale Global Corporate Bond Fund regained its title as the highest performing fund. The fund produced a 12-month return of 10.05%, with the T. Rowe Price Dynamic Global Bond fund in second place with a return of 8.41%.
GLOBAL BOND FUNDS
| GLOBAL BOND FUNDS | ASX mFund | 1m (%) | 3m (%) | 1y (%) | 3y (%) | 5y (%) |
|---|---|---|---|---|---|---|
| Advance International Fixed Interest Multi-Blend | 0.48 | 1.59 | 4.66 | 3.45 | 3.11 | |
| Alpha Diversified Income | mFund | -0.38 | 0.42 | -2.02 | 2.44 | 2.44 |
| AMP Future Directions International Bond Fund | 0.22 | 0.91 | 5.00 | 3.88 | 3.69 | |
| AMP Capital International Bond | 0.28 | 1.04 | 5.56 | 4.41 | 4.22 | |
| ANZ-CFS Global Credit Income EF | 0.51 | 1.71 | -1.18 | 0.12 | 1.52 | |
| Ardea Real Outcome Fund | -0.11 | 0.81 | 5.82 | 5.81 | 5.23 | |
| Bentham Professional Global Income | mFund | 1.24 | 4.49 | 5.29 | 3.22 | 5.14 |
| Bentham Wholesale High Yield | mFund | 1.46 | 4.91 | 1.44 | 3.74 | 6.92 |
| Bentham Syndicated Loan ASX Class | mFund | 1.28 | 4.42 | 0.08 | 2.16 | 4.85 |
| Kapstream Wholesale Absolute Return Income | mFund | 0.17 | 0.96 | 1.40 | 2.29 | 2.69 |
| BlackRock Wholesale International Bond | 0.58 | 1.83 | 6.39 | 4.80 | 4.62 | |
| Pendal Enhanced Global Fixed Interest (Wholesale) | 0.01 | -0.14 | 5.39 | 4.52 | 3.98 | |
| CFS Wholesale Global Corporate Bond | 0.39 | 2.48 | 10.05 | 6.18 | 6.50 | |
| Dimensional Five-Year Diversified Fixed Interest | 0.02 | 0.20 | 1.19 | 2.01 | 2.49 | |
| Dimensional Global Bond Trust | 0.35 | 1.36 | 6.56 | 5.54 | 5.34 | |
| Dimensional Two-Year Diversified Fixed Interest | 0.02 | 0.16 | 1.14 | 1.73 | 1.86 | |
| Franklin Templeton Global Aggregate Bond Fund (W Class) | 0.27 | 2.13 | 4.89 | 5.14 | 3.57 | |
| Franklin Templeton Multisector Bond (Institutional) | 0.91 | 2.18 | -5.68 | -3.28 | -0.04 | |
| Invesco Wholesale Senior Secured Income | mFund | 1.45 | 4.31 | 0.53 | 2.34 | 4.54 |
| Legg Mason Brandywine Global Opp Fixed Income A | mFund | 2.06 | 7.29 | 5.30 | 4.05 | 5.21 |
| Legg Mason Western Asset Global Bond Fund | 0.91 | 3.01 | 6.88 | 4.85 | n/a | |
| Legg Mason Western Asset Macro Opportunities Bond Fund | 1.50 | 6.14 | 5.45 | 4.96 | n/a | |
| Macquarie Global Income Opportunities Fund | 0.47 | 2.15 | 2.80 | 3.28 | 3.73 | |
| Macquarie Core Australian Fixed Interest Plus Fund | 0.01 | 1.03 | 4.80 | 6.20 | 5.59 | |
| Mercer Global Credit Fund | 0.43 | 2.29 | 6.68 | 5.13 | 5.38 | |
| Mercer Global Sovereign Bond Fund | 0.44 | 1.16 | 5.13 | 5.80 | 5.29 | |
| Omega Global Corporate Bond | 0.26 | 2.11 | 6.23 | 4.50 | 4.67 | |
| PIMCO Global Bond (Wholesale) | mFund | 0.72 | 2.01 | 6.61 | 4.87 | 5.35 |
| PIMCO Global Credi (Wholesale) | mFund | 0.50 | 1.97 | 5.20 | 4.43 | 4.81 |
| PIMCO Diversified Fixed Interest Wholesale | mFund | 0.33 | 1.25 | 5.64 | 5.04 | 4.88 |
| PIMCO Unconstrained Bond (Wholesale) | mFund | 0.97 | 2.47 | 4.79 | 3.26 | 4.27 |
| State Street SSgA Global Fixed Income Trust | 0.03 | 0.11 | 5.55 | 4.76 | 4.33 | |
| T.Rowe Price Dynamic Global Bond Fund | 1.55 | 2.23 | 8.41 | 3.05 | 3.03 | |
| Templeton Global Bond Plus (Wholesale) | 0.05 | 0.67 | -6.96 | -1.34 | 0.49 | |
| UBS Global Credit Fund | 0.52 | 2.92 | 7.76 | 5.80 | 6.27 | |
| UBS International Bond | 0.23 | 0.99 | 5.18 | 4.51 | 4.52 | |
| Vanguard International Credit Securities Index (Hedged) | 0.36 | 2.26 | 5.83 | 5.01 | 5.26 | |
| Vanguard International Fixed Interest Index (Hedged) | 0.07 | 0.11 | 4.76 | 4.42 | 4.14 |
*End of December 2020. Returns in AUD after fees.