Global Bond Funds February 2020

Conditions in February remained favourable to Australian investors in global bonds, although the conditions were not quite as favourable as in January. US Treasury bond yields plunged all along the curve for a second month running while sovereign bond yields in other major markets also fell significantly with the exception of Italy. Additionally, the Aussie dollar was also a little weaker against all the other major currencies.

As in January, not all funds in the survey finished up for the month. 28 of the 39 funds in the YieldReport survey finished the month with a positive return and 9 of these funds produced a return above 1.0% for the month. Of the 11 funds which produced negative returns, five of them produced a return of -1.0% or less.

The median 1 month performance in the YieldReport survey of global bond funds in February was +0.59 (January: +1.693%) while the median return over the 12 months including February came to +8.58% (January: +7.97%). The Barclays Global Aggregate Bond Index, a widely-used index in this sector, returned +1.24% in February and +9.86% over the rolling year when calculated in Australian dollars.

In US markets, by the end of the month the 2-year Treasury bond yields had lost 40bps to 0.92%, the 10-year yield had shed 35bps to 1.15% and the 30-year yield finished 32bps lower at 1.68%.

In other major bond markets, German 10-year bunds were 17bps lower at -0.61%, French 10-year OATS had shed 11bps to -0.29%, 10-year UK gilt yields finished the month 10bps lower at 0.44%. Italian 10-year government bond yields increased by 20bps to 1.12% over the month as it became the European epicentre for the COVID-19 pandemic.

The best performing global fund for the month in the YieldReport February survey was the T. Rowe Price Dynamic Global Bond fund. It produced an extremely good return of 2.05% for the month, following a worst-in-class performance (-1.55%) in January and a near-podium performance in December (+1.96%).

According to the manager at the end of February, the fund gained from its duration (5.85 years) and the average A-rating of its holdings. It also gained from “equity and credit hedges”. However, the manager also noted the fund suffered from its exposure to non-USD currencies such as the Australian dollar, Turkish lira, and Russian rouble.

The second-highest return was produced by Pendal’s Enhanced Global Fixed Interest (Wholesale) fund. Its return of +1.95% followed a top-quartile return of +2.34% in January and a near worst-in-class performance in December (-0.59%).

In terms of fund performance for the twelve months to the end of February 2020, Macquarie’s Core Plus Australian Fixed Interest fund took held its position as the highest performing fund. The Macquarie fund produced a 12-month return of 12.43% while the UBS Global Credit Fund retained second place with a return of 12.28% for the year.

GLOBAL BOND FUNDS

GLOBAL BOND FUNDS	ASX mFund	1m (%)	3m (%)	1y (%)	3y (%)	5y (%)
Advance International Fixed Interest Multi-Blend		0.53	2.04	7.39	3.30	2.25
Alpha Diversified Income	IWM01	0.87	3.18	8.36	4.59	3.60
AMP Future Directions International Bond Fund		1.13	2.60	8.58	4.02	3.10
AMP Capital International Bond		1.18	2.73	9.12	4.55	3.63
ANZ-CFS Global Credit Income EF		-0.75	-0.46	0.71	0.78	1.23
Ardea Real Outcome Fund		1.26	1.95	9.11	5.95	4.07
Bentham Professional Global Income	BAM05	-0.20	0.73	1.67	3.41	4.10
Bentham Wholesale High Yield	BAM03	-1.36	0.32	6.21	4.84	5.76
Bentham Syndicated Loan ASX Class	BAM04	-1.32	0.33	2.26	3.40	4.56
Kapstream Wholesale Absolute Return Income	KAP01	0.46	1.15	3.86	3.10	2.92
BlackRock Wholesale International Bond		0.88	2.46	9.16	4.62	4.06
Pendal Enhanced Global Fixed Interest (Wholesale)		1.95	3.73	11.17	4.81	3.81
CFS Wholesale Global Bond		n/a	n/a	n/a	n/a	n/a
CFS Wholesale Global Corporate Bond		0.93	3.33	11.98	5.47	4.99
Dimensional Five-Year Diversified Fixed Interest		0.22	0.59	3.08	2.39	2.83
Dimensional Global Bond Trust		0.99	2.80	10.75	5.44	4.94
Dimensional Two-Year Diversified Fixed Interest		0.13	0.37	2.11	1.83	2.08
Franklin Templeton Global Aggregate Bd W		0.64	2.78	10.64	5.23	3.38
Franklin Templeton Multisector Bond I		-0.88	1.31	-8.47	-1.36	-0.14
Invesco Wholesale Senior Secured Income	IAL05	-1.13	1.00	2.09	3.03	4.03
Legg Mason Brandywine Global Opp Fixed Income A	LMA07	-0.33	0.41	2.72	2.19
Legg Mason Brandywine Global Fixed Income A		-1.61	-0.22	3.94	3.13	2.06
Legg Mason Western Asset Global Bond Fund		0.27	2.44	9.13	5.15	n/a
Legg Mason Western Asset Macro Opportunities Bond Fund		-2.98	0.09	7.89	5.73	n/a
Macquarie Global Income Opportunities Fd		0.36	1.61	6.26	4.07	3.44
Macquarie Core Plus Australian Fxd Intr		1.17	2.37	12.43	7.38	5.11
Mercer Global Credit Fund		0.72	2.67	10.58	5.11	4.54
Mercer Global Sovereign Bond Fund		0.49	2.18	10.34	6.16	5.04
Omega Global Corporate Bond		0.94	3.00	10.43	4.74	4.25
PIMCO Global Bond Wholesale	PMF03	0.63	2.57	8.20	4.74	4.54
PIMCO Global Credi Wholesale	PMF01	0.58	2.49	8.81	4.79	4.44
PIMCO Diversified Fixed Interest Wholesale	PMF02	0.59	2.01	8.45	5.16	4.37
PIMCO Unconstrained Bond Wholesale	PMF06	-0.37	0.53	2.00	2.64	2.90
State Street SSgA Global Fixed Income		1.60	3.21	9.87	4.96	4.28
T.Rowe Price Dynamic Global Bond Fund		2.05	2.44	1.01	0.40	2.67
Templeton Global Bond Plus W		-0.72	0.13	-2.71	0.80	0.70
UBS Global Credit Fund		0.78	3.17	12.28	5.79	4.98
UBS International Bond		1.09	2.81	9.12	4.90	4.22
Vanguard International Credit Securities Index Hdg		0.99	2.98	11.02	5.45	4.68
Vanguard International Fixed Interest Index Hdg		1.45	2.88	9.09	4.75	4.24