Conditions in August were tough for Australian investors in global bonds. Longer-term US Treasury bond yields finished the month considerably higher, as did UK gilt yields. Major euro-zone yields also increased. The Aussie dollar was stronger against all the major currencies.
Unlike the June quarter and July when most funds fared well, only about a third of the funds in the survey finished the month in the black in August. 14 of the 38 funds in the YieldReport survey finished the month with a positive return. Of the 24 funds which produced negative returns, four funds produced a return of less than -1.00%.
The median 1 month performance in the YieldReport survey of global bond funds in August was -0.44% (July: +1.37%) while the median return over the 12 months including August came to +2.19% (July: +4.47%). The Barclays Global Aggregate Bond Index, a widely-used index in this sector, returned -0.74% in August and +2.96% over the rolling year (when hedged into Australian dollars).
In US markets, the 2-year Treasury yield added 1bps to 0.12%, the 10-year yield gained 18bps to 0.71% and the 30-year yield finished 28bps higher at 1.48%. BBB spreads contracted again.
In other major bond markets, German 10-year bund yields finished the month 13bps higher at -0.40%, the French 10-year OAT yield gained 10bps to -0.10% while Italian 10-year BTP yields increased by 8bps to 1.09%. The 10-year UK gilt yield finished the month 21bps higher at 0.31%.
The best performing global fund for the month in the YieldReport August survey was the Bentham Professional Syndicated Loan fund. It produced return of 2.10% for the month following top-three performances of 1.60% and 1.89% in July and June respectively.
The second-highest return was produced by the Bentham Wholesale High Yield fund. Its return of 1.55% followed a near-highest return of 3.62% in July and a second-quartile performance of 1.31% in June.
In terms of fund performance for the twelve months to the end of August 2020, the Legg Mason Western Asset Macro Opportunities Bond Fund took over from the CFS Wholesale Global Corporate Bond Fund title as the highest performing fund. The Legg Mason fund produced a 12-month return of 10.10% while the T. Rowe Price Dynamic Global Bond Fund was next with a return of 8.32%.
GLOBAL BOND FUNDS
| GLOBAL BOND FUNDS | ASX mFund | 1m (%) | 3m (%) | 1y (%) | 3y (%) | 5y (%) |
|---|---|---|---|---|---|---|
| Advance International Fixed Interest Multi-Blend | -0.48 | 1.45 | 1.51 | 2.84 | 2.83 | |
| Alpha Diversified Income | mFund | -0.17 | 1.37 | -2.85 | 2.00 | 2.38 |
| AMP Future Directions International Bond Fund | -0.76 | 1.00 | 2.38 | 3.53 | 3.49 | |
| AMP Capital International Bond | -0.72 | 1.13 | 2.94 | 4.06 | 4.02 | |
| ANZ-CFS Global Credit Income EF | 0.32 | 2.24 | -1.11 | 0.16 | 1.18 | |
| Ardea Real Outcome Fund | 0.07 | 2.12 | 5.20 | 5.83 | 4.64 | |
| Bentham Professional Global Income | mFund | 1.30 | 4.21 | 1.92 | 2.65 | 3.93 |
| Bentham Wholesale High Yield | mFund | 1.55 | 6.60 | -0.39 | 2.89 | 5.46 |
| Bentham Syndicated Loan ASX Class | mFund | 2.10 | 5.69 | -2.69 | 1.33 | 3.42 |
| Kapstream Wholesale Absolute Return Income | mFund | 0.11 | 1.18 | 0.49 | 2.26 | 2.58 |
| BlackRock Wholesale International Bond | -0.65 | 2.91 | 2.36 | 4.13 | 4.41 | |
| Pendal Enhanced Global Fixed Interest (Wholesale) | -1.19 | -0.25 | 2.03 | 4.16 | 3.72 | |
| CFS Wholesale Global Corporate Bond | -0.84 | 3.47 | 7.50 | 5.83 | 6.11 | |
| Dimensional Five-Year Diversified Fixed Interest | 0.02 | 0.42 | 0.60 | 1.86 | 2.63 | |
| Dimensional Global Bond Trust | -0.43 | 2.06 | 2.78 | 4.93 | 5.23 | |
| Dimensional Two-Year Diversified Fixed Interest | 0.07 | 0.34 | 1.18 | 1.65 | 1.96 | |
| Franklin Templeton Global Aggregate Bond Fund (W Class) | -0.65 | 1.35 | 0.92 | 4.03 | 3.12 | |
| Franklin Templeton Multisector Bond (Institutional) | -0.45 | -0.48 | -5.61 | -3.94 | -0.34 | |
| Invesco Wholesale Senior Secured Income | mFund | 1.45 | 5.78 | -2.90 | 1.25 | 3.11 |
| Legg Mason Brandywine Global Opp Fixed Income A | mFund | -1.21 | 3.04 | 1.93 | 1.62 | 3.92 |
| Legg Mason Brandywine Global Fixed Income A | n/a | 0.69 | 0.66 | 1.65 | 3.45 | |
| Legg Mason Western Asset Global Bond Fund | -0.52 | 2.09 | 4.00 | 3.89 | n/a | |
| Legg Mason Western Asset Macro Opportunities Bond Fund | 0.44 | 6.53 | 10.10 | 3.91 | n/a | |
| Macquarie Global Income Opportunities Fund | 0.03 | 2.67 | 1.49 | 2.92 | 3.24 | |
| Macquarie Core Australian Fixed Interest Plus Fund | -0.55 | 1.90 | 1.24 | 6.10 | 5.10 | |
| Mercer Global Credit Fund | -0.51 | 3.82 | 4.34 | 4.71 | 5.08 | |
| Mercer Global Sovereign Bond Fund | -0.37 | 1.49 | 2.63 | 5.50 | 5.31 | |
| Omega Global Corporate Bond | -1.00 | 2.08 | 2.80 | 3.84 | 4.41 | |
| PIMCO Global Bond (Wholesale) | mFund | 0.28 | 2.92 | 3.13 | 4.20 | 5.02 |
| PIMCO Global Credi (Wholesale) | mFund | 0.06 | 3.04 | 3.19 | 3.90 | 4.63 |
| PIMCO Diversified Fixed Interest Wholesale | mFund | -0.02 | 1.95 | 2.49 | 4.64 | 4.58 |
| PIMCO Unconstrained Bond (Wholesale) | mFund | 1.09 | 3.74 | 4.29 | 2.69 | 3.58 |
| State Street SSgA Global Fixed Income Trust | -1.02 | 0.22 | 2.19 | 4.52 | 4.43 | |
| T.Rowe Price Dynamic Global Bond Fund | -0.03 | 1.43 | 8.32 | 2.60 | 3.17 | |
| Templeton Global Bond Plus (Wholesale) | -0.72 | -1.21 | -6.43 | -1.72 | 0.54 | |
| UBS Global Credit Fund | -0.58 | 3.42 | 5.21 | 5.21 | 5.72 | |
| UBS International Bond | -0.50 | 1.68 | 2.69 | 4.34 | 4.48 | |
| Vanguard International Credit Securities Index (Hedged) | -0.70 | 2.73 | 2.58 | 4.49 | 4.96 | |
| Vanguard International Fixed Interest Index (Hedged) | -0.97 | -0.03 | 1.50 | 4.20 | 4.28 |
*End of August 2020. Returns in AUD after fees.