Global Bond Funds December 2019

Conditions were difficult for Australian investors in global bond funds in December, as they had been in October and September. US Treasury bond yields fell a little at the front of the curve but increased noticeably elsewhere on the curve while sovereign bond yields in other major markets also rose markedly. The Aussie dollar was stronger against all the other major currencies, noticeably so against the US dollar.

Despite the environment, 18 of the 40 funds in the YieldReport survey finished the month with a positive return and six of these 18 funds produced a return above 1.0% for the month. Of the 21 funds which produced negative returns, just one of them produced a return of -1.0% or less.

The median 1 month performance in the YieldReport survey of global bond funds in December was -0.03% (November: -0.15%) while the median return over the 12 months including December came to +7.25% (November: +8.62%). The Barclays Global Aggregate Bond Index, a widely-used index in this sector, returned -0.32% in December and +7.57% over the rolling year when calculated in Australian dollars.

In US markets, by the end of the month, the 2-year Treasury bond yield had lost 3bps to 1.57% while the 10-year yield had gained 14bps to 1.92% and the 30-year yield had increased by 19bps to 2.39%.

In other advanced-economy markets, yields of German 10-year bunds and French 10-year OATS both finished 17bps higher at -0.19% and 0.12% respectively while 10-year UK gilt yields had increased by 12bps to 0.73%. Italian 10-year government bond yields finished 19bps higher at 1.42%.

(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 December survey was the Legg Mason Western Asset Macro Opportunities Bond Fund. It produced an outstanding return of 3.47% for the month, following a near-worst-in-class performance (-0.69%) in November and the top-ranked performance in October.

According to the manager, at the end of December the fund had 32% of its assets in the US, 9% in Russia, 7% in Mexico, 6% in Indonesia and the balance (46%) spread throughout the world. Around two-thirds of the fund is in “investment grade” assets. The fund’s effective duration was 6 years with 17% of the fund in cash or very short-term securities.

The second-highest return was produced by the Franklin Templeton Multisector Bond (Institutional) fund. Its return of +2.82% followed a third quintile return of -0.28% in November and a bottom-quartile performance in October (-0.56%).

In terms of fund performance for the twelve months to the end of December 2019, the above-mentioned Macro Opportunities Bond Fund retained its position as the highest performing fund after it produced a 12-month return of 15.94% while the UBS Global Credit Fund took over second place with a return of 12.21% for the year.

GLOBAL BOND FUNDS

GLOBAL BOND FUNDS	ASX mFund	1m (%)	3m (%)	1y (%)	3y (%)	5y (%)
Advance International Fixed Interest Multi-Blend		0.00	-0.72	6.57	2.74	2.27
Alpha Diversified Income	mFund	-0.35	0.19	7.32	3.43	3.32
AMP Future Directions International Bond Fund		-0.34	-0.87	6.56	3.25	2.83
AMP Capital International Bond		-0.30	-0.73	7.09	3.78	3.35
ANZ-CFS Global Credit Income EF		0.53	0.96	4.02	2.27	2.45
Ardea Real Outcome Fund		-0.01	0.53	8.40	5.42	4.22
Bentham Professional Global Income	mFund	-0.10	0.10	-0.44	4.64	4.17
Bentham Wholesale High Yield	mFund	0.12	1.12	8.24	6.22	6.01
Bentham Syndicated Loan ASX Class	mFund	-0.30	-0.16	0.81	4.37	4.73
Kapstream Wholesale Absolute Return Income	mFund	0.08	0.32	3.26	2.93	3.02
BlackRock Wholesale International Bond		-0.10	-0.85	7.67	4.02	3.90
Pendal Enhanced Global Fixed Interest (Wholesale)		-0.59	-1.70	6.64	3.40	3.24
CFS Wholesale Global Bond		-0.43	-0.99	6.89	2.85	2.93
CFS Wholesale Global Corporate Bond		0.01	0.50	10.61	4.89	4.75
Dimensional Five-Year Diversified Fixed Interest		0.00	-0.13	3.19	2.47	2.96
Dimensional Global Bond Trust		-0.57	-1.01	8.82	4.66	4.70
Dimensional Two-Year Diversified Fixed Interest		0.09	0.22	2.39	1.90	2.14
Franklin Templeton Global Aggregate Bd W		-0.29	-0.67	9.77	3.99	3.44
Franklin Templeton Multisector Bond I		2.82	1.96	-3.60	-0.32	0.56
Invesco Wholesale Senior Secured Income	mFund	-0.57	-0.62	1.06	3.57	4.10
Legg Mason Brandywine Global Opp Fixed Income A	mFund	2.27	2.49	9.73	4.48	3.47
Legg Mason Brandywine Global Fixed Income A		1.93	1.97	8.72	4.65	3.30
Legg Mason Western Asset Global Bond Fund		0.43	0.38	8.61	4.89	n/a
Legg Mason Western Asset Macro Opportunities Bond Fund		3.47	6.02	15.94	7.88	n/a
Macquarie Global Income Opportunities Fd		0.47	0.95	7.16	4.06	3.41
Macquarie Core Plus Australian Fxd Intr		-1.25	-0.99	11.44	6.46	4.89
Mercer Global Credit Fund		0.22	0.43	10.11	4.70	4.49
Mercer Global Sovereign Bond Fund		-0.34	-1.39	8.54	5.23	5.06
Omega Global Corporate Bond		-0.32	-0.30	7.89	4.08	3.89
PIMCO Global Bond Wholesale	mFund	-0.08	1.03	8.48	4.14	5.00
PIMCO Global Credi Wholesale	mFund	0.22	1.23	9.00	3.98	4.70
PIMCO Diversified Fixed Interest Wholesale	mFund	-0.20	0.72	8.93	4.32	4.85
PIMCO Unconstrained Bond Wholesale	mFund	0.50	-0.44	2.27	3.17	2.93
State Street SSgA Global Fixed Income		-0.58	-1.66	6.60	3.75	3.40
T.Rowe Price Dynamic Global Bond Fund		1.96	1.43	-0.47	0.20	2.98
Templeton Global Bond Plus W		1.47	0.97	1.68	1.88	1.26
UBS Global Credit Fund		0.41	1.03	12.21	5.35	4.89
UBS International Bond		-0.21	-0.46	7.19	4.01	4.00
Vanguard International Credit Securities Index Hdg		-0.06	0.05	9.65	4.82	4.51
Vanguard International Fixed Interest Index Hdg		-0.64	-1.67	6.16	3.67	3.87