Conditions in July were generally favourable for Australian investors in global bonds. US Treasury bond yields finished the month lower, especially so at the long end. UK gilt yields fell moderately, as did sovereign bond yields in major euro-zone markets. The Aussie dollar was stronger against the US dollar and the yen but weaker against the euro.
As in the June quarter, the overwhelming majority of funds in the survey finished the month in the black in July. Only 3 of the 38 funds in the YieldReport survey finished the month with a negative return. Of the 35 funds which produced positive returns, a little over three-quarter of them produced a return of +1.00% or more. Eight funds produced a return in excess of 2.00%.
The median 1 month performance in the YieldReport survey of global bond funds in July was +1.37% (June: +0.88%) while the median return over the 12 months including July came to +4.47% (June: +3.56%). The Barclays Global Aggregate Bond Index, a widely-used index in this sector, returned +1.23% in July and +6.13% over the rolling year (when hedged into Australian dollars).
In US markets, the 2-year Treasury yield fell by 3bps to 0.11%, the 10-year yield lost 13bps to 0.53% and the 30-year yield finished 21bps lower at 1.20%. BBB spreads contracted again.
In other major bond markets, German 10-year bund yields finished the month 7bps lower at -0.53%, the French 10-year OAT yield lost 8bps to -0.20% while Italian 10-year BTP yields shed 24bps to 1.01%. The 10-year UK gilt yield finished the month 7bps lower at 0.10%.
The best performing global fund for the month in the YieldReport July survey was the Legg Mason Western Asset Macro Opportunities Bond Fund. It produced a remarkable return of 4.43% for the month following a top-quartile performance of 1.56% in June and a top-ranked performance of, coincidentally, 4.43% in May.
The second-highest return was produced by the Bentham Wholesale High Yield fund. Its return of 3.62% followed a second-quartile performance of 1.31% in June and a near-highest return of 3.74% in May.
In terms of fund performance for the twelve months to the end of July 2020, the CFS Wholesale Global Corporate Bond retained its title as the highest performing fund. The CFS fund produced a 12-month return of 10.82% while the UBS Global Credit Fund was next with a return of 7.75%.
| GLOBAL BOND FUNDS | ASX mFund | 1m (%) | 3m (%) | 1y (%) | 3y (%) | 5y (%) |
|---|---|---|---|---|---|---|
| Advance International Fixed Interest Multi-Blend | 1.40 | 2.86 | 3.95 | 3.28 | 2.72 | |
| Alpha Diversified Income | mFund | -0.24 | 1.22 | -2.23 | 2.10 | 2.37 |
| AMP Future Directions International Bond Fund | 1.21 | 2.59 | 5.30 | 4.07 | 3.55 | |
| AMP Capital International Bond | 1.25 | 2.73 | 5.87 | 4.60 | 4.08 | |
| ANZ-CFS Global Credit Income EF | 1.02 | 3.08 | -1.73 | -0.06 | 0.94 | |
| Ardea Real Outcome Fund | 1.16 | 2.45 | 6.37 | 5.89 | 4.68 | |
| Bentham Professional Global Income | mFund | 1.54 | 6.48 | 0.52 | 2.17 | 3.53 |
| Bentham Wholesale High Yield | mFund | 3.62 | 8.90 | -1.26 | 2.37 | 4.79 |
| Bentham Syndicated Loan ASX Class | mFund | 1.60 | 7.24 | -4.91 | 0.69 | 2.83 |
| Kapstream Wholesale Absolute Return Income | mFund | 0.60 | 1.38 | 0.68 | 2.30 | 2.55 |
| BlackRock Wholesale International Bond | 1.90 | 4.50 | 5.47 | 4.63 | 4.52 | |
| Pendal Enhanced Global Fixed Interest (Wholesale) | 0.96 | 0.88 | 6.45 | 4.95 | 4.12 | |
| CFS Wholesale Global Corporate Bond | 2.48 | 5.90 | 10.82 | 6.35 | 6.13 | |
| Dimensional Five-Year Diversified Fixed Interest | 0.17 | 0.55 | 1.02 | 2.02 | 2.65 | |
| Dimensional Global Bond Trust | 1.39 | 3.49 | 5.24 | 5.50 | 5.25 | |
| Dimensional Two-Year Diversified Fixed Interest | 0.10 | 0.58 | 1.35 | 1.71 | 1.98 | |
| Franklin Templeton Global Aggregate Bond Fund (W Class) | 1.35 | 4.15 | 3.37 | 4.55 | 3.36 | |
| Franklin Templeton Multisector Bond (Institutional) | -0.47 | 0.05 | -14.05 | -3.75 | -1.00 | |
| Invesco Wholesale Senior Secured Income | mFund | 1.87 | 7.89 | -4.51 | 0.75 | 2.64 |
| Legg Mason Brandywine Global Opp Fixed Income A | mFund | 3.40 | 8.03 | 2.85 | 2.25 | 3.47 |
| Legg Mason Brandywine Global Fixed Income A | n/a | 3.80 | 0.59 | 1.86 | 2.81 | |
| Legg Mason Western Asset Global Bond Fund | 1.80 | 4.29 | 6.58 | 4.32 | n/a | |
| Legg Mason Western Asset Macro Opportunities Bond Fund | 4.43 | 10.76 | 7.10 | 4.09 | n/a | |
| Macquarie Global Income Opportunities Fund | 1.26 | 3.85 | 1.97 | 2.93 | 3.21 | |
| Macquarie Core Australian Fixed Interest Plus Fund | 1.17 | 3.70 | 3.82 | 6.13 | 5.29 | |
| Mercer Global Credit Fund | 2.61 | 6.47 | 6.98 | 5.06 | 5.11 | |
| Mercer Global Sovereign Bond Fund | 1.51 | 2.86 | 5.79 | 6.00 | 5.35 | |
| Omega Global Corporate Bond | 2.30 | 3.85 | 6.54 | 4.50 | 4.54 | |
| PIMCO Global Bond (Wholesale) | mFund | 1.58 | 3.67 | 4.63 | 4.48 | 4.86 |
| PIMCO Global Credi (Wholesale) | mFund | 1.62 | 4.47 | 4.47 | 4.16 | 4.55 |
| PIMCO Diversified Fixed Interest Wholesale | mFund | 1.17 | 2.91 | 3.98 | 4.83 | 4.59 |
| PIMCO Unconstrained Bond (Wholesale) | mFund | 0.90 | 4.40 | 1.99 | 2.55 | 3.07 |
| State Street SSgA Global Fixed Income Trust | 0.94 | 1.13 | 6.17 | 5.25 | 4.64 | |
| T.Rowe Price Dynamic Global Bond Fund | 1.41 | 2.93 | 6.32 | 2.78 | 3.30 | |
| Templeton Global Bond Plus (Wholesale) | -0.13 | -0.62 | -9.91 | -1.41 | -0.18 | |
| UBS Global Credit Fund | 2.49 | 5.60 | 7.75 | 5.66 | 5.70 | |
| UBS International Bond | 1.14 | 2.76 | 5.35 | 4.78 | 4.50 | |
| Vanguard International Credit Securities Index (Hedged) | 2.03 | 4.63 | 5.76 | 5.06 | 5.01 | |
| Vanguard International Fixed Interest Index (Hedged) | 0.79 | 0.87 | 5.17 | 4.88 | 4.48 |
*End of July 2020. Returns in AUD after fees.