Conditions were exceptionally favourable for Australian investors in global bond funds in March. Although the Aussie dollar generally strengthened against major currencies, sovereign bond yields fell heavily in all advanced-economy markets with Japan as the exception.
Most of the 39 funds in the YieldReport survey finished the month with a positive return, with 34 out of the 39 funds finishing March in the black.
The median 1 month performance in the YieldReport survey of global bond funds was an outstanding +1.41% (previously +0.31%) while the median return over the previous 12 months came to +3.47% (February: +2.39%). The Barclays Global Aggregate Bond Index, a widely-used index in this sector, returned +1.81% in March and +4.62% over the previous 12 months when calculated in Australian dollars.
In US markets, 2-year Treasury bond yields shed 26bps to 2.26%, 10-year yields plunged 31bps to 2.41% and 30-year yields dropped by 27bps to 2.81%. In other advanced-economy markets, German 10-year bund yields lost 25bps to -0.07%, UK 10-year yields fell 18bps to 0.99% while French 10-year yields shed 25bps to 0.32%. Italian 10-year yields lost 28bps to 2.48%.
(For a more-detailed view of the influences on Australian and offshore yields during the month, click here)
The best performing global fund for the month in the YieldReport March survey was Macquarie’s Core Plus Australia Fixed Interest fund. This fund had originally been designated as an Australian fund but, as over 50% of its assets are offshore, it has been reassigned to the global funds sector. It produced a return of 2.65% for the month, following a top-quartile performance in February (+1.24%) and a near-top-quartile performance in January (+1.50%).
The second-highest March return was produced by Dimensional Global Bond Trust. Its return of 2.28% followed a “middle of the road” performance in February (+0.20%) and a “near-worst” performance in January (+0.35%, 37th out of 39).
In terms of fund performance for the twelve months to the end of March 2019, the Macquarie fund also qualified as the highest-returning fund for the month and thus it displaced the Mercer Global Sovereign Bond Fund as the best-performing fund in the sector. Its 8.15% 12-month return represents an increase on its comparable figure of 6.04% from February.
GLOBAL BOND FUNDS
| GLOBAL BOND FUNDS | ASX mFund | 1m (%) | 3m (%) | 1y (%) | 3y (%) | 5y (%) |
|---|---|---|---|---|---|---|
| Advance International Fixed Interest Multi-Blend | 1.37 | 2.64 | 1.97 | 1.66 | 2.56 | |
| Alpha Diversified Income | mFund | 0.79 | 3.35 | 4.76 | 3.09 | 3.18 |
| AMP Future Directions International Bond Fund | 1.63 | 2.68 | 3.30 | 2.17 | 3.37 | |
| AMP Capital International Bond | 1.69 | 2.82 | 3.82 | 2.70 | 3.91 | |
| ANZ-CFS Global Credit Income EF | 0.76 | 2.45 | 2.42 | 4.42 | 3.41 | |
| Ardea Real Outcome Fund | 1.67 | 2.96 | 5.48 | 5.35 | 3.90 | |
| Bentham Professional Global Income | mFund | -0.40 | 1.42 | 0.77 | 6.77 | 4.53 |
| Bentham Wholesale High Yield | mFund | 0.98 | 6.08 | 4.59 | 8.20 | 5.65 |
| Bentham Syndicated Loan ASX Class | mFund | -0.14 | 2.75 | -0.83 | 1.67 | |
| Kapstream Wholesale Absolute Return Income | mFund | 0.64 | 1.33 | 2.81 | 3.08 | 3.12 |
| BlackRock Wholesale International Bond | 1.88 | 3.06 | 3.84 | 3.01 | 4.46 | |
| BT Global Fixed Interest Wholesale | 2.11 | 2.16 | 3.26 | 1.91 | 4.07 | |
| BT Institutional Enhanced Global Fixed Interest | 2.14 | 2.23 | 3.47 | 2.09 | 4.26 | |
| CFS Wholesale Global Bond | 1.47 | 3.01 | 3.40 | 1.60 | 3.47 | |
| CFS Wholesale Global Corporate Bond | 1.97 | 4.07 | 3.74 | 4.17 | 4.74 | |
| Dimensional Five-Year Diversified Fixed Interest | 0.83 | 1.53 | 3.60 | 2.29 | 3.46 | |
| Dimensional Global Bond Trust | 2.28 | 3.91 | 5.97 | 3.76 | ||
| Dimensional Two-Year Diversified Fixed Interest | 0.45 | 1.00 | 2.71 | 1.93 | 2.30 | |
| Franklin Templeton Global Aggregate Bd W | 1.22 | 3.51 | 3.24 | 1.75 | ||
| Franklin Templeton Multisector Bond I | -2.65 | 1.03 | -1.24 | 3.70 | 1.93 | |
| Invesco Wholesale Senior Secured Income | mFund | -0.17 | 3.63 | 2.27 | 5.78 | 4.29 |
| Legg Mason Brandywine Global Opp Fixed Income A | mFund | 1.19 | 4.16 | -0.35 | 3.28 | 4.60 |
| Legg Mason Brandywine Global Fixed Income A | 1.41 | 3.85 | 0.46 | 3.18 | 4.81 | |
| Legg Mason Western Asset Global Bond Fund | 1.18 | 2.71 | 2.28 | n/a | n/a | |
| Legg Mason Western Asset Macro Opportunities Bond Fund | 0.82 | 4.80 | -0.48 | n/a | n/a | |
| Macquarie Core Plus Australian Fxd Intr | 2.65 | 5.48 | 8.15 | 5.34 | 5.18 | |
| Macquarie Global Income Opportunities Fd | 1.11 | 3.13 | 3.30 | 4.10 | 3.03 | |
| Mercer Global Credit Fund | 1.87 | 3.92 | 4.22 | 3.60 | 4.58 | |
| Mercer Global Sovereign Bond Fund | 1.64 | 2.51 | 4.69 | 3.90 | 5.71 | |
| Omega Global Corporate Bond | 1.83 | 2.79 | 3.70 | 2.92 | 3.98 | |
| PIMCO Global Bond Wholesale | mFund | 1.47 | 3.05 | 3.82 | 4.27 | 5.36 |
| PIMCO Global Credi Wholesale | mFund | 1.43 | 3.12 | 4.11 | 3.74 | 4.81 |
| PIMCO Diversified Fixed Interest Wholesale | mFund | 1.45 | 3.12 | 4.88 | 4.08 | 5.04 |
| PIMCO Unconstrained Bond Wholesale | mFund | 0.34 | 1.65 | 2.67 | 5.01 | 3.50 |
| State Street SSgA Global Fixed Income | 1.84 | 2.58 | 4.23 | 2.60 | 4.18 | |
| T.Rowe Price Dynamic Global Bond Fund | 0.07 | -0.93 | -0.39 | 1.50 | ||
| Templeton Global Bond Plus W | -1.34 | 1.75 | 1.74 | 3.33 | 1.87 | |
| UBS Global Credit Fund | 2.05 | 4.79 | 4.27 | 4.36 | 4.81 | |
| UBS International Bond | 1.62 | 2.83 | 4.18 | 3.11 | 4.58 | |
| Vanguard International Credit Securities Index Hdg | 1.98 | 3.78 | 4.64 | 3.79 | 4.64 | |
| Vanguard International Fixed Interest Index Hdg | 1.68 | 2.45 | 4.26 | 2.66 | 4.68 |
*End of March 2019. Returns in AUD after fees.