Conditions in February proved to be, once again, “challenging” for Australian investors in global bonds. Longer-term US Treasury bond yields finished the month significantly higher and 10-year sovereign yields in major euro-zone and UK markets also rose markedly. The Aussie dollar was stronger against the major currencies with the exception of sterling. Just 9 of the 38 funds in the YieldReport survey finished the month with a positive return.
The median 1 month performance in the YieldReport survey of global bond funds in February was -1.68% (January: -0.58%) while the median return over the 12 months including February came to 0.09% (January: 2.57%). The Barclays Global Aggregate Bond Index, a widely-used index in this sector, returned -1.68% in February and +0.09% over the rolling year (when hedged into Australian dollars).
In US markets, the 2-year Treasury yield inched up 1bp to 0.12% over the month, the 10-year yield leapt 38bps to 1.44% while the 30-year yield finished 31bps higher at 2.14%. BBB spreads tightened.
In other major bond markets, the German 10-year bund yield finished 26bps higher at -0.26%, the French 10-year OAT yield gained 28bps to -0.01% and the 10-year UK gilt yield finished the month 49bps higher at 0.82%.
The best performing global fund for the month in the YieldReport February survey was the Templeton Global Bond Plus (Wholesale) fund. It produced a return of +1.93% for the month following a bottom-quartile return of -0.92% in January and a bottom-quartile performance of 0.05% in December.
The second-highest return was produced by the Bentham Professional Global Income fund. Its return of +0.92% followed a top-3 return of +0.95% in January and a top-quartile performance of 1.24% in December.
In terms of fund performance for the twelve months to the end of February, the T. Rowe Price Dynamic Global Bond Fund retained its title as the highest performing fund. The fund produced a 12-month return of 9.24%, with the Bentham Professional Global Income fund in second place with a return of 7.40%.
GLOBAL BOND FUNDS
| GLOBAL BOND FUNDS | ASX mFund | 1m (%) | 3m (%) | 1y (%) | 3y (%) | 5y (%) |
|---|---|---|---|---|---|---|
| Advance International Fixed Interest Multi-Blend | -1.73 | -1.92 | 0.11 | 2.81 | 2.41 | |
| Alpha Diversified Income | mFund | -2.00 | -2.32 | -7.02 | 1.67 | 1.92 |
| AMP Future Directions International Bond Fund | -2.07 | -2.64 | -0.93 | 3.26 | 2.71 | |
| AMP Capital International Bond | -2.03 | -2.50 | -0.39 | 3.79 | 3.24 | |
| ANZ-CFS Global Credit Income EF | 0.33 | 1.07 | 0.15 | 0.19 | 1.84 | |
| Ardea Real Outcome Fund | 0.14 | 0.15 | 4.06 | 5.62 | 5.63 | |
| Bentham Professional Global Income | mFund | 0.92 | 3.14 | 7.40 | 3.19 | 6.44 |
| Bentham Wholesale High Yield | mFund | 0.07 | 2.11 | 3.43 | 4.20 | 7.20 |
| Bentham Syndicated Loan ASX Class | mFund | 0.35 | 2.92 | 2.60 | 2.37 | 5.65 |
| Kapstream Wholesale Absolute Return Income | mFund | -0.16 | 0.11 | 0.26 | 2.06 | 2.63 |
| BlackRock Wholesale International Bond | -1.56 | -1.56 | 1.53 | 4.37 | 3.74 | |
| Pendal Enhanced Global Fixed Interest (Wholesale) | -3.07 | -3.99 | -3.03 | 3.38 | 2.25 | |
| CFS Wholesale Global Corporate Bond | -1.90 | -2.79 | 3.14 | 5.56 | 5.51 | |
| Dimensional Five-Year Diversified Fixed Interest | -0.15 | -0.08 | 0.51 | 2.20 | 2.10 | |
| Dimensional Global Bond Trust | -2.79 | -3.06 | -0.44 | 4.83 | 4.04 | |
| Dimensional Two-Year Diversified Fixed Interest | -0.04 | 0.04 | 0.89 | 1.79 | 1.73 | |
| Franklin Templeton Global Aggregate Bond Fund (W Class) | -2.48 | -3.05 | -1.61 | 4.03 | 2.42 | |
| Franklin Templeton Multisector Bond (Institutional) | -0.55 | -0.98 | -6.06 | -4.19 | 0.38 | |
| Invesco Wholesale Senior Secured Income | mFund | 0.83 | 4.27 | 4.00 | 2.94 | 5.35 |
| Legg Mason Brandywine Global Opp Fixed Income A | mFund | -0.49 | 0.72 | 6.61 | 3.26 | 4.54 |
| Legg Mason Western Asset Global Bond Fund | -2.02 | -1.81 | 1.97 | 4.36 | n/a | |
| Legg Mason Western Asset Macro Opportunities Bond Fund | -3.40 | -4.70 | 2.35 | 3.32 | n/a | |
| Macquarie Global Income Opportunities Fund | -1.15 | -0.70 | 0.46 | 2.94 | 3.67 | |
| Macquarie Core Australian Fixed Interest Plus Fund | -3.99 | -4.47 | -3.43 | 4.81 | 4.40 | |
| Mercer Global Credit Fund | -1.70 | -2.04 | 1.56 | 4.80 | 4.54 | |
| Mercer Global Sovereign Bond Fund | -2.19 | -2.72 | -0.69 | 4.66 | 3.89 | |
| Omega Global Corporate Bond | -1.82 | -2.57 | -0.09 | 3.99 | 3.75 | |
| PIMCO Global Bond (Wholesale) | mFund | -1.40 | -0.99 | 2.38 | 4.54 | 4.69 |
| PIMCO Global Credi (Wholesale) | mFund | -1.15 | -1.07 | 1.21 | 4.34 | 4.27 |
| PIMCO Diversified Fixed Interest Wholesale | mFund | -2.58 | -2.57 | -0.03 | 4.15 | 3.95 |
| PIMCO Unconstrained Bond (Wholesale) | mFund | 0.21 | 1.58 | 5.90 | 3.41 | 4.96 |
| State Street SSgA Global Fixed Income Trust | -2.12 | -2.80 | -1.21 | 3.99 | 2.98 | |
| T.Rowe Price Dynamic Global Bond Fund | 0.78 | 2.81 | 9.24 | 3.00 | 3.16 | |
| Templeton Global Bond Plus (Wholesale) | 1.93 | 1.04 | -4.78 | -1.31 | 1.38 | |
| UBS Global Credit Fund | -1.86 | -2.29 | 1.95 | 5.39 | 5.50 | |
| UBS International Bond | -1.74 | -2.08 | -0.25 | 3.97 | 3.52 | |
| Vanguard International Credit Securities Index (Hedged) | -1.76 | -2.21 | 0.08 | 4.60 | 4.38 | |
| Vanguard International Fixed Interest Index (Hedged) | -2.08 | -2.69 | -1.62 | 3.66 | 2.82 |
*End of Feb 2021. Returns in AUD after fees.