Conditions were generally favourable for Australian investors in global bond funds in February. Although bond yields increased in all advanced economy markets except that of Japan, the Aussie dollar depreciated by 2.5% against the greenback and 2% against the euro, thus making up for the small increase in yields.
A substantial majority of the 39 funds in the YieldReport survey finished the month with a positive return, with 30 out of the 39 funds finishing February in the black.
The median 1 month performance in the YieldReport survey of global bond funds was +0.31% (previously +1.18%) while the median return over the previous 12 months was +2.39% (January: +1.89%). The Barclays Global Aggregate Bond Index, a widely-used index in this sector, returned +.06% in February and +3.65% over the previous 12 months when calculated in Australian dollars.
(For a more detailed view of the influences on Australian and offshore yields during the month, click here)
In US markets, 2-year Treasury bond yields gained 6bps to 2.52%, 10-year yields increased by 9bps to 2.72% and 30-year yields added 8bps to 3.08%. In other advanced-economy markets, German 10-year bund yields gained 3bps to 0.18%, UK 10-year yields increased by 6bps to 1.17% while French 10-year yields added 2bps to 0.57%. Italian 10-year yields reversed all of January’s fall, plus a bit more and increased by 17bps to 2.75%.
The best performing global fund for the month in the YieldReport February survey was the Invesco Wholesale Senior Secured Income fund. Its return of 1.71% followed a good performance in January (2.07%) and a “bringing up the rear” performance in December (-2.53%).
The second-highest February return was produced by the Alpha Diversified Income fund. Its return of 1.65% for the month came after a bottom-quartile performance in January (1.74%) and a below-average performance in December (0.91%).
In terms of fund performance for the twelve months to the end of February 2019, the Mercer Global Sovereign Bond Fund retained its position as the best-performing fund in the sector. Mercer had a great December which helped offset its relatively-mediocre performances in January and February. In the last year, this fund returned 4.61%, down from its annual return of 4.72% in January.
The second-highest return over 12 months was produced by the Dimensional Global Bond Trust. This fund returned 4.46% over the period.
GLOBAL BOND FUNDS
| GLOBAL BOND FUNDS | ASX mFund | 1m (%) | 3m (%) | 1y (%) | 3y (%) | 5y (%) |
|---|---|---|---|---|---|---|
| Advance International Fixed Interest Multi-Blend | 0.09 | 2.57 | 1.07 | 1.57 | 2.39 | |
| Alpha Diversified Income | mFund | 1.65 | 3.47 | 4.29 | 2.96 | 3.06 |
| AMP Future Directions International Bond Fund | 0.04 | 2.31 | 2.35 | 2.04 | 3.13 | |
| AMP Capital International Bond | 0.08 | 2.43 | 2.86 | 2.56 | 3.66 | |
| ANZ-CFS Global Credit Income EF | 0.45 | 0.81 | 0.41 | 3.65 | 2.32 | |
| Ardea Real Outcome Fund | 0.67 | 1.59 | 3.78 | 5.02 | 3.62 | |
| Bentham Professional Global Income | mFund | 0.86 | 0.19 | 0.53 | 7.71 | 4.63 |
| Bentham Wholesale High Yield | mFund | 1.57 | 3.37 | 3.00 | 8.83 | 5.61 |
| Bentham Syndicated Loan ASX Class | mFund | 1.21 | 0.39 | 2.07 | 7.73 | 5.11 |
| Kapstream Wholesale Absolute Return Income | mFund | 0.38 | 0.79 | 2.07 | 3.03 | 3.06 |
| BlackRock Wholesale International Bond | -0.03 | 2.70 | 2.57 | 2.72 | 4.14 | |
| BT Global Fixed Interest Wholesale | -0.31 | 1.77 | 2.29 | 1.05 | 3.68 | |
| BT Institutional Enhanced Global Fixed Interest | -0.30 | 1.83 | 2.49 | 1.22 | 3.86 | |
| CFS Wholesale Global Bond | 0.33 | 2.60 | 2.04 | 1.33 | 3.24 | |
| CFS Wholesale Global Corporate Bond | 0.46 | 3.17 | 1.85 | 4.22 | 4.47 | |
| Dimensional Five-Year Diversified Fixed Interest | 0.17 | 1.31 | 3.05 | 2.31 | 3.23 | |
| Dimensional Global Bond Trust | 0.38 | 2.60 | 4.46 | 3.40 | ||
| Dimensional Two-Year Diversified Fixed Interest | 0.20 | 1.06 | 2.36 | 1.88 | 2.24 | |
| Franklin Templeton Global Aggregate Bd W | 0.54 | 4.32 | 3.43 | 1.16 | ||
| Franklin Templeton Multisector Bond I | 0.76 | 3.36 | 2.30 | 5.82 | 2.84 | |
| Invesco Wholesale Senior Secured Income | mFund | 1.69 | 1.25 | 2.72 | 6.92 | 4.36 |
| Legg Mason Brandywine Global Opp Fixed Income A | mFund | -0.32 | 3.89 | -0.62 | 4.07 | 4.84 |
| Legg Mason Brandywine Global Fixed Income A | -0.45 | 3.35 | -0.01 | 4.01 | 4.92 | |
| Legg Mason Western Asset Global Bond Fund | 0.14 | 3.28 | 2.13 | n/a | n/a | |
| Legg Mason Western Asset Macro Opportunities Bond Fund | -0.22 | 7.84 | -0.13 | n/a | n/a | |
| Macquarie Global Income Opportunities Fd | 0.61 | 2.16 | 2.20 | 3.91 | 2.92 | |
| Mercer Global Credit Fund | 0.60 | 3.22 | 2.51 | 3.60 | 4.26 | |
| Mercer Global Sovereign Bond Fund | 0.11 | 3.34 | 4.61 | 3.37 | 5.47 | |
| Omega Global Corporate Bond | 0.16 | 2.37 | 1.92 | 2.90 | 3.70 | |
| PIMCO Global Bond Wholesale | mFund | 0.28 | 2.40 | 3.15 | 4.32 | 5.15 |
| PIMCO Global Credi Wholesale | mFund | 0.37 | 2.57 | 3.16 | 3.82 | 4.56 |
| PIMCO Diversified Fixed Interest Wholesale | mFund | 0.64 | 2.68 | 4.20 | 3.84 | 4.80 |
| PIMCO Unconstrained Bond Wholesale | mFund | 0.31 | 1.40 | 2.39 | 5.67 | n/a |
| State Street SSgA Global Fixed Income | -0.14 | 2.34 | 3.61 | 2.19 | 3.87 | |
| T.Rowe Price Dynamic Global Bond Fund | -0.19 | 0.16 | -0.98 | 1.91 | ||
| Templeton Global Bond Plus W | 0.91 | 2.75 | 3.77 | 4.95 | 2.49 | |
| UBS Global Credit Fund | 0.58 | 3.70 | 2.26 | 4.52 | 4.46 | |
| UBS International Bond | 0.13 | 2.52 | 3.26 | 2.99 | 4.34 | |
| Vanguard International Credit Securities Index Hdg | 0.34 | 2.91 | 2.99 | 3.70 | 4.32 | |
| Vanguard International Fixed Interest Index Hdg | -0.13 | 2.16 | 3.77 | 2.31 | 4.41 |
*End of February 2019. Returns in AUD after fees.