Conditions were generally positive for Australian investors in global bond funds in June. While the Aussie dollar strengthened against the major currencies with the exception of the euro, sovereign bond yields fell by modest amounts at the long end of the US curve and by reasonable amounts in the euro-zone markets.
All bar one of the 40 funds in the YieldReport survey finished the month with a positive return, and three quarters of these produced a return above 1.0% for the month. Five produced a return in excess of 2.0%.
The median 1 month performance in the YieldReport survey of global bond funds was a first-rate return of 1.31% (previously +0.91%) while the median return over the previous 12 months came to +6.71% (May: +5.16%). The Barclays Global Aggregate Bond Index, a widely-used index in this sector, returned +1.38% in June and +7.50% over the 12 months to the end of June when calculated in Australian dollars.
In US markets, by the end of the month, 2-year Treasury bond yields finished 19bps lower at 1.75%, 10-year yields had decreased by 12bps to 2.01% and 30-year yields had lost 4bps to 2.53%. In other advanced-economy markets, German 10-year bund yields had fallen by 12bps to -0.32%, UK 10-year yields had lost 6bps to 0.83% and French 10-year yields finished in negative territory after they had dropped by 21bps to -0.01%. Italian 10-year yields plummeted 57bps to 2.09%.
(For a more detailed view of the influences on Australian and offshore yields during the month, click here)
The best performing global fund for the month in the YieldReport June survey was the Legg Mason Western Asset Macro Opportunities Bond Fund. It produced a return of 3.30% for the month, following a bottom-quartile performance in May (+0.14%) and a top-quartile performance in April (+0.87%).
According to Western Asset Management, the fund’s emerging market debt exposure was the largest contributor to the fund’s performance for the month as spreads tightened and local currencies gained against the USD. Exposures to investment-grade and high-yield credit were also positive as spreads tightened. However, the fund’s short positions in European markets proved to be negative.
The second-highest June return was produced by Legg Mason Brandywine Global Opportunistic Fixed Income. Its return of +2.36% followed a sub-par performance in May (+0.68%) and a near “worst-in-class” performance in April (-0.48%).
In terms of fund performance for the twelve months to the end of June 2019, Macquarie’s Core Plus Australian Fixed Interest fund retained its position as the highest-returning fund for the month with a return of 12.42%, up from its comparable figure of 11.10% in May. The Legg Mason Western Asset Macro Opportunities Bond Fund was the next-highest performing fund (+10.38%).
GLOBAL BOND FUNDS.
| GLOBAL BOND FUNDS | ASX mFund | 1m (%) | 3m (%) | 1y (%) | 3y (%) | 5y (%) |
|---|---|---|---|---|---|---|
| Advance International Fixed Interest Multi-Blend | 1.30 | 2.51 | 5.23 | 1.86 | 2.61 | |
| Alpha Diversified Income | mFund | 1.00 | 2.57 | 7.60 | 3.27 | 3.37 |
| AMP Future Directions International Bond Fund | 1.23 | 2.53 | 6.12 | 2.28 | 3.36 | |
| AMP Capital International Bond | 1.27 | 2.63 | 6.64 | 2.80 | 3.89 | |
| ANZ-CFS Global Credit Income EF | 0.54 | 0.51 | 1.66 | 3.03 | 2.13 | |
| Ardea Real Outcome Fund | 1.06 | 2.61 | 7.38 | 5.83 | 3.98 | |
| Bentham Professional Global Income | mFund | 0.26 | 0.50 | 0.87 | 6.35 | 4.11 |
| Bentham Wholesale High Yield | mFund | 2.00 | 2.57 | 6.77 | 7.66 | 5.75 |
| Bentham Syndicated Loan ASX Class | mFund | 0.11 | 1.16 | 2.07 | 5.88 | |
| Kapstream Wholesale Absolute Return Income | mFund | 0.32 | 1.11 | 3.46 | 3.08 | 3.09 |
| BlackRock Wholesale International Bond | 1.60 | 3.07 | 7.33 | 3.23 | 4.53 | |
| Pendal Enhanced Global Fixed Interest (Wholesale) | 1.45 | 3.04 | 5.87 | 1.86 | 4.41 | |
| CFS Wholesale Global Bond | 1.67 | 2.80 | 6.87 | 1.65 | 3.72 | |
| CFS Wholesale Global Corporate Bond | 2.18 | 3.39 | 8.04 | 4.04 | 4.76 | |
| Dimensional Five-Year Diversified Fixed Interest | 0.50 | 1.22 | 4.25 | 2.14 | 3.35 | |
| Dimensional Global Bond Trust | 1.58 | 3.22 | 8.77 | 3.81 | ||
| Dimensional Two-Year Diversified Fixed Interest | 0.27 | 0.79 | 3.08 | 1.94 | 2.30 | |
| Franklin Templeton Global Aggregate Bd W | 2.19 | 3.91 | 9.36 | 2.14 | ||
| Franklin Templeton Multisector Bond I | 1.71 | 1.35 | 4.44 | 4.27 | 1.54 | |
| Invesco Wholesale Senior Secured Income | mFund | 0.18 | 1.20 | 2.99 | 5.15 | 4.36 |
| Legg Mason Brandywine Global Opp Fixed Income A | mFund | 2.36 | 2.56 | 5.88 | 3.73 | 4.40 |
| Legg Mason Brandywine Global Fixed Income A | 1.93 | 2.33 | 5.61 | 3.93 | 4.50 | |
| Legg Mason Western Asset Global Bond Fund | 1.83 | 2.91 | 6.47 | n/a | n/a | |
| Legg Mason Western Asset Macro Opportunities Bond Fund | 3.30 | 4.34 | 10.38 | n/a | n/a | |
| Macquarie Global Income Opportunities Fd | 1.03 | 1.73 | 5.33 | 4.16 | 3.16 | |
| Macquarie Core Plus Australian Fxd Intr | 1.61 | 4.08 | 12.43 | 5.45 | 5.39 | |
| Mercer Global Credit Fund | 1.65 | 3.14 | 8.06 | 3.60 | 4.62 | |
| Mercer Global Sovereign Bond Fund | 1.62 | 3.06 | 7.69 | 3.85 | 5.94 | |
| Omega Global Corporate Bond | 1.43 | 2.94 | 6.93 | 3.07 | 4.05 | |
| PIMCO Global Bond Wholesale | mFund | 1.18 | 2.75 | 6.49 | 4.06 | 5.27 |
| PIMCO Global Credi Wholesale | mFund | 1.30 | 2.76 | 7.12 | 3.74 | 4.76 |
| PIMCO Diversified Fixed Interest Wholesale | mFund | 1.12 | 2.98 | 7.72 | 4.03 | 5.03 |
| PIMCO Unconstrained Bond Wholesale | mFund | 0.56 | 1.33 | 3.72 | 4.67 | 3.34 |
| State Street SSgA Global Fixed Income | 1.31 | 2.78 | 7.00 | 2.51 | 4.27 | |
| T.Rowe Price Dynamic Global Bond Fund | -0.80 | 1.35 | 1.86 | 1.36 | ||
| Templeton Global Bond Plus W | 1.34 | 1.49 | 5.94 | 4.24 | 1.60 | |
| UBS Global Credit Fund | 2.25 | 3.73 | 9.04 | 4.34 | 4.96 | |
| UBS International Bond | 1.31 | 2.64 | 6.80 | 2.99 | 4.60 | |
| Vanguard International Credit Securities Index Hdg | 1.69 | 3.24 | 8.24 | 3.87 | 4.75 | |
| Vanguard International Fixed Interest Index Hdg | 1.14 | 2.57 | 6.81 | 2.48 | 4.74 |
*End of June 2019. Returns in AUD after fees.