Conditions in January proved to be “challenging” for Australian investors in global bonds. Longer-term US Treasury bond yields finished the month noticeably higher while 10-year sovereign yields in major euro-zone market rose modestly. The UK 10-year gilt yield moved almost in line with its US counterpart. The Aussie dollar was weaker or stable against the major currencies with the exception of yen. 13 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 January was -0.58% (December: +0.41%) while the median return over the 12 months including January came to 2.57% (December: 5.29%). The Barclays Global Aggregate Bond Index, a widely-used index in this sector, returned -0.63% in January and +3.06% over the rolling year (when hedged into Australian dollars).
In US markets, the 2-year Treasury yield slipped 1bp to 0.11% over the month, the 10-year yield jumped 14bps to 1.06% while the 30-year yield finished 18bps higher at 1.83%. BBB spreads tightened a touch.
In other major bond markets, the German 10-year bund yield finished 5bps higher at -0.52%, the French 10-year OAT yield gained 5bps to -0.29% and the Italian 10-year government bond yield rose by 10bps to 0.64%. The 10-year UK gilt yield finished the month 13bps higher at 0.33%.
The best performing global fund for the month in the YieldReport January survey was the Invesco Wholesale Senior Secured Income Fund. It produced a return of +1.93% for the month following a 1.45% return in December.
The second-highest return was produced by the Bentham Professional Syndicated Loan fund. Its return of +1.26% followed a return of +1.28% in December.
GLOBAL BOND FUNDS
| GLOBAL BOND FUNDS | ASX mFund | 1m (%) | 3m (%) | 1y (%) | 3y (%) | 5y (%) |
|---|---|---|---|---|---|---|
| Advance International Fixed Interest Multi-Blend | -0.67 | 0.87 | 2.41 | 3.30 | 2.81 | |
| Alpha Diversified Income | mFund | 0.05 | 0.05 | -4.29 | 2.44 | 2.37 |
| AMP Future Directions International Bond Fund | -0.80 | 0.13 | 2.31 | 3.83 | 3.28 | |
| AMP Capital International Bond | -0.76 | 0.27 | 2.87 | 4.36 | 3.81 | |
| ANZ-CFS Global Credit Income EF | 0.23 | 1.61 | -0.85 | 0.00 | 1.80 | |
| Ardea Real Outcome Fund | 0.13 | 0.40 | 5.22 | 5.54 | 5.44 | |
| Bentham Professional Global Income | mFund | 0.95 | 4.57 | 6.22 | 2.94 | 5.79 |
| Bentham Wholesale High Yield | mFund | 0.56 | 5.06 | 1.95 | 3.86 | 7.26 |
| Bentham Syndicated Loan ASX Class | mFund | 1.26 | 5.10 | 0.90 | 2.26 | 5.41 |
| Kapstream Wholesale Absolute Return Income | mFund | 0.10 | 0.77 | 0.88 | 2.20 | 2.64 |
| BlackRock Wholesale International Bond | -0.57 | 1.05 | 4.05 | 4.71 | 4.23 | |
| Pendal Enhanced Global Fixed Interest (Wholesale) | -0.96 | -0.83 | 1.99 | 4.38 | 3.11 | |
| CFS Wholesale Global Corporate Bond | -1.29 | 0.99 | 6.10 | 5.84 | 6.10 | |
| Dimensional Five-Year Diversified Fixed Interest | 0.21 | 0.26 | 1.03 | 2.30 | 2.26 | |
| Dimensional Global Bond Trust | -0.25 | 0.89 | 3.82 | 5.88 | 4.93 | |
| Dimensional Two-Year Diversified Fixed Interest | 0.21 | 0.30 | 1.22 | 1.84 | 1.80 | |
| Franklin Templeton Global Aggregate Bond Fund (W Class) | -0.85 | 0.55 | 1.54 | 4.93 | 3.07 | |
| Franklin Templeton Multisector Bond (Institutional) | -1.33 | 0.17 | -6.38 | -4.18 | -0.04 | |
| Invesco Wholesale Senior Secured Income | mFund | 1.93 | 6.49 | 1.97 | 2.72 | 5.09 |
| Legg Mason Brandywine Global Opp Fixed Income A | mFund | -0.83 | 5.47 | 4.83 | 3.07 | 4.85 |
| Legg Mason Western Asset Global Bond Fund | -0.69 | 2.01 | 4.35 | 4.68 | n/a | |
| Legg Mason Western Asset Macro Opportunities Bond Fund | -2.81 | 4.52 | 2.79 | 3.81 | n/a | |
| Macquarie Global Income Opportunities Fund | 0.00 | 1.52 | 2.00 | 3.23 | 3.85 | |
| Macquarie Core Australian Fixed Interest Plus Fund | -0.51 | -0.01 | 1.77 | 6.10 | 5.41 | |
| Mercer Global Credit Fund | -0.78 | 1.40 | 4.06 | 5.05 | 5.06 | |
| Mercer Global Sovereign Bond Fund | -0.98 | 0.28 | 2.04 | 5.51 | 4.62 | |
| Omega Global Corporate Bond | -1.02 | 0.98 | 2.71 | 4.38 | 4.26 | |
| PIMCO Global Bond (Wholesale) | mFund | -0.29 | 1.44 | 4.49 | 4.89 | 5.04 |
| PIMCO Global Credi (Wholesale) | mFund | -0.41 | 1.42 | 2.97 | 4.52 | 4.56 |
| PIMCO Diversified Fixed Interest Wholesale | mFund | -0.32 | 0.61 | 3.23 | 5.03 | 4.60 |
| PIMCO Unconstrained Bond (Wholesale) | mFund | 0.39 | 2.45 | 5.29 | 3.28 | 4.65 |
| State Street SSgA Global Fixed Income Trust | -0.73 | -0.62 | 2.53 | 4.75 | 3.70 | |
| T.Rowe Price Dynamic Global Bond Fund | 0.46 | 2.34 | 10.62 | 3.03 | 2.95 | |
| Templeton Global Bond Plus (Wholesale) | -0.92 | -1.10 | -7.25 | -2.07 | 0.45 | |
| UBS Global Credit Fund | -0.95 | 1.93 | 4.69 | 5.67 | 6.07 | |
| UBS International Bond | -0.58 | 0.37 | 2.62 | 4.48 | 4.10 | |
| Vanguard International Credit Securities Index (Hedged) | -0.81 | 1.02 | 2.88 | 4.96 | 4.91 | |
| Vanguard International Fixed Interest Index (Hedged) | -0.69 | -0.50 | 1.93 | 4.38 | 3.53 |
*End of January 2021. Returns in AUD after fees.