Conditions were favourable for Australian investors in global bond funds in January. Bond yields fell in all advanced economy markets, save for Japan, where they are glued to zero. The one negative factor for investors was the strength of the Aussie dollar against the major currencies.
Almost every one of the 39 funds in the YieldReport survey finished the month with a positive return. There was one exception, the T. Rowe Price Dynamic Global Bond.
The median 1-month performance in the YieldReport survey of global bond funds was +1.18% (previously +1.01%) while the median return over the previous 12 months was +1.89% (December: +0.45%). The Barclays Global Aggregate Bond Index, a widely-used index in this sector, returned +1.01% in January and +3.29% over the previous 12 months when calculated in Australian dollars.
In US markets, 2-year and 10-year Treasury bond yields both dropped by 5bps to 2.45% and 2.63% respectively while 30-year yields slipped 1bp to 3.00%. In other advanced-economy markets, German 10-year bund yields lost 9bps to 0.15%, UK 10-year yields shed 3bps to 1.11% while French 10-year yields dropped 15bps to 0.56%. Italian 10-year yields fell again, this month by “only” 15bps to 2.59%.
The best performing global fund for the month in the YieldReport January survey and, for a third consecutive month, was the Legg Mason Western Asset Macro Opportunities Bond Fund. Its return of +4.18% follows “best in show” performances in December (+3.74%) and November (+1.00%).
The second-highest January return was produced by Bentham Wholesale High Yield Fund. Its return of 3.43% for the month came after bottom-quartile performances in December (-1.60%) and November (-0.61%)
In terms of fund performance for the twelve months to the end of January 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 performance in January and produce a return of 4.72%.
The second-highest return over 12 months was again produced by the Vanguard International Fixed Interest Index Fund. This fund returned 3.89%.
(For a more detailed view of the influences on Australian and offshore yields during the month, click here)
GLOBAL BOND FUNDS
| GLOBAL BOND FUNDS | ASX mFund | 1m (%) | 3m (%) | 1y (%) | 3y (%) | 5y (%) |
|---|---|---|---|---|---|---|
| Advance International Fixed Interest Multi-Blend | 1.17 | 2.29 | 0.66 | 1.61 | 2.50 | |
| Alpha Diversified Income | mFund | 0.87 | 0.93 | 2.86 | 2.47 | 2.87 |
| AMP Future Directions International Bond Fund | 1.00 | 2.36 | 1.85 | 2.25 | 3.30 | |
| AMP Capital International Bond | 1.04 | 2.49 | 2.37 | 2.78 | 3.84 | |
| ANZ-CFS Global Credit Income EF | 1.16 | -0.41 | -0.28 | 3.55 | 2.36 | |
| Ardea Real Outcome Fund | 0.63 | 1.39 | 3.38 | 5.00 | 4.15 | |
| Bentham Professional Global Income | mFund | 0.91 | -1.68 | -0.16 | 6.65 | 4.62 |
| Bentham Wholesale High Yield | mFund | 3.43 | 1.16 | 0.47 | 8.39 | 5.60 |
| Bentham Syndicated Loan ASX Class | mFund | 1.66 | -1.66 | 0.89 | 7.04 | 4.96 |
| Kapstream Wholesale Absolute Return Income | mFund | 0.31 | 0.36 | 1.97 | 2.86 | 3.08 |
| BlackRock Wholesale International Bond | 1.19 | 3.06 | 2.00 | 3.01 | 4.35 | |
| BT Global Fixed Interest Wholesale | 0.37 | 2.45 | 2.35 | 1.50 | 3.81 | |
| BT Institutional Enhanced Global Fixed Interest | 0.39 | 2.50 | 2.55 | 1.68 | 3.99 | |
| CFS Wholesale Global Bond | 1.18 | 2.38 | 1.33 | 1.68 | 3.27 | |
| CFS Wholesale Global Corporate Bond | 1.60 | 2.42 | 0.25 | 4.36 | 4.61 | |
| Dimensional Five-Year Diversified Fixed Interest | 0.53 | 1.49 | 2.84 | 2.41 | 3.27 | |
| Dimensional Global Bond Trust | 1.20 | 2.47 | 3.86 | 3.63 | ||
| Dimensional Two-Year Diversified Fixed Interest | 0.35 | 1.08 | 2.15 | 1.87 | 2.24 | |
| Franklin Templeton Global Aggregate Bd W | 1.71 | 4.12 | 2.93 | 1.19 | ||
| Franklin Templeton Multisector Bond I | 2.99 | 3.11 | 1.00 | 4.63 | 3.05 | |
| Invesco Wholesale Senior Secured Income | mFund | 2.15 | -1.48 | 1.22 | 6.17 | 4.09 |
| Legg Mason Brandywine Global Opp Fixed Income A | mFund | 3.26 | 5.02 | -1.33 | 4.52 | 5.23 |
| Legg Mason Brandywine Global Fixed Income A | 2.86 | 4.22 | -0.34 | 4.33 | 5.29 | |
| Legg Mason Western Asset Global Bond Fund | 1.37 | 3.72 | 0.86 | n/a | n/a | |
| Legg Mason Western Asset Macro Opportunities Bond Fund | 4.18 | 9.16 | -1.91 | n/a | n/a | |
| Macquarie Global Income Opportunities Fd | 1.38 | 1.17 | 1.23 | 3.59 | 2.91 | |
| Mercer Global Credit Fund | 1.40 | 2.41 | 0.88 | 3.65 | 4.35 | |
| Mercer Global Sovereign Bond Fund | 0.74 | 3.50 | 4.72 | 3.78 | 5.53 | |
| Omega Global Corporate Bond | 0.79 | 2.25 | 1.05 | 3.07 | 3.80 | |
| PIMCO Global Bond Wholesale | mFund | 1.27 | 2.20 | 2.42 | 4.32 | 5.36 |
| PIMCO Global Credi Wholesale | mFund | 1.29 | 2.39 | 2.13 | 3.78 | 4.64 |
| PIMCO Diversified Fixed Interest Wholesale | mFund | 1.00 | 2.08 | 3.46 | 3.80 | 4.83 |
| PIMCO Unconstrained Bond Wholesale | mFund | 0.99 | 0.80 | 1.90 | 5.10 | N/A |
| State Street SSgA Global Fixed Income | 0.87 | 3.16 | 3.80 | 2.70 | 4.02 | |
| T.Rowe Price Dynamic Global Bond Fund | -0.81 | 0.13 | 0.16 | 1.92 | ||
| Templeton Global Bond Plus W | 2.20 | 2.45 | 2.40 | 3.70 | 2.73 | |
| UBS Global Credit Fund | 2.09 | 2.35 | 0.58 | 4.58 | 4.54 | |
| UBS International Bond | 1.06 | 2.62 | 2.83 | 3.29 | 4.43 | |
| Vanguard International Credit Securities Index Hdg | 1.42 | 2.50 | 1.89 | 3.84 | 4.42 | |
| Vanguard International Fixed Interest Index Hdg | 0.89 | 2.99 | 3.89 | 2.80 | 4.54 |
*End of January 2019. Returns in AUD after fees.