Conditions could hardly have been better for Australian investors in global bond funds in May. The Aussie dollar weakened against the major currencies with the exception of sterling and sovereign bond yields fell significantly in advanced-economy markets.
A majority of the 40 funds in the YieldReport survey finished the month with a positive return, with 33 out of the 40 funds finishing April in front.
The median 1 month performance in the YieldReport survey of global bond funds was a more-than-respectable +0.91% (previously +0.36%) while the median return over the previous 12 months came to +5.16% (April: +4.13%). The Barclays Global Aggregate Bond Index, a widely-used index in this sector, returned a substantial +1.42% in May and a respectable +6.02% over the 12 months to the end of May when calculated in Australian dollars.
In US markets, by the end of the month, 2-year Treasury bond yields finished 32bps lower at 1.94%, 10-year yields had decreased by 37bps to 2.13% and 30-year yields had lost 36bps to 2.57%. In other advanced-economy markets, German 10-year bund yields had fallen by 22bps to -0.20%, UK 10-year yields had lost 30bps to 0.89% and French 10-year yields had moved 16bps lower to 0.21%. Italian 10-year yields went against the trend and were up 10bps to 2.65%.
(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 May survey was the T. Rowe Price Dynamic Global Bond Yield fund. It produced a return of 2.27% for the month, following a bottom-quartile performance in April (-.10%) and a bottom-quartile performance in March (+0.07%).
The second-highest April return was produced by Pendal’s Enhanced Global Fixed Interest (Wholesale) fund. Its return of +2.20% followed a “worst in class” performance in April (-0.62%) and a top-three performance in March (+2.14%).
In terms of fund performance for the twelve months to the end of May 2019, Macquarie’s Core Plus Australian Fixed Interest fund retained its position as the highest-returning fund for the month with a return of 11.10%, up from its comparable figure of 9.52% in April. The Franklin Templeton Global Aggregate Bond was the next-highest performing fund (+7.28%) while Mercer’s Global Sovereign Bond Fund was just behind with a return of 7.23%.
GLOBAL BOND FUNDS
| GLOBAL BOND FUNDS | ASX mFund | 1m (%) | 3m (%) | 1y (%) | 3y (%) | 5y (%) |
|---|---|---|---|---|---|---|
| Advance International Fixed Interest Multi-Blend | 1.10 | 2.57 | 3.90 | 1.94 | 2.43 | |
| Alpha Diversified Income | mFund | 0.90 | 2.36 | 6.68 | 3.11 | 3.24 |
| AMP Future Directions International Bond Fund | 1.20 | 2.92 | 4.86 | 2.47 | 3.24 | |
| AMP Capital International Bond | 1.24 | 3.05 | 5.39 | 2.99 | 3.77 | |
| ANZ-CFS Global Credit Income EF | -0.73 | 0.31 | 0.88 | 2.77 | 2.11 | |
| Ardea Real Outcome Fund | 0.93 | 3.23 | 6.27 | 5.60 | 3.83 | |
| Bentham Professional Global Income | mFund | -0.89 | -0.17 | 0.87 | 5.71 | 4.15 |
| Bentham Wholesale High Yield | mFund | -1.23 | 1.54 | 4.87 | 7.16 | 5.48 |
| Bentham Syndicated Loan ASX Class | mFund | -0.44 | 0.92 | 2.10 | 5.88 | |
| Kapstream Wholesale Absolute Return Income | mFund | 0.41 | 1.43 | 3.30 | 3.04 | 3.10 |
| BlackRock Wholesale International Bond | 1.35 | 3.34 | 5.80 | 3.19 | 4.33 | |
| Pendal Enhanced Global Fixed Interest (Wholesale) | 2.20 | 3.74 | 5.18 | 2.28 | 4.22 | |
| CFS Wholesale Global Bond | 0.92 | 2.60 | 5.00 | 1.73 | 3.49 | |
| CFS Wholesale Global Corporate Bond | 0.80 | 3.18 | 5.28 | 3.96 | 4.44 | |
| Dimensional Five-Year Diversified Fixed Interest | 0.54 | 1.55 | 3.84 | 2.43 | 3.27 | |
| Dimensional Global Bond Trust | 1.43 | 3.93 | 7.22 | 4.02 | ||
| Dimensional Two-Year Diversified Fixed Interest | 0.32 | 0.97 | 2.89 | 1.98 | 2.27 | |
| Franklin Templeton Global Aggregate Bd W | 1.14 | 2.93 | 7.28 | 1.98 | ||
| Franklin Templeton Multisector Bond I | -2.02 | -2.99 | 1.43 | 3.51 | 1.34 | |
| Invesco Wholesale Senior Secured Income | mFund | -0.50 | 0.91 | 2.70 | 5.03 | 4.40 |
| Legg Mason Brandywine Global Opp Fixed Income A | mFund | 0.68 | 1.39 | 2.98 | 3.75 | 3.98 |
| Legg Mason Brandywine Global Fixed Income A | 0.79 | 1.82 | 3.40 | 3.82 | 4.23 | |
| Legg Mason Western Asset Global Bond Fund | 0.81 | 2.25 | 4.50 | n/a | n/a | |
| Legg Mason Western Asset Macro Opportunities Bond Fund | 0.14 | 1.84 | 5.53 | n/a | n/a | |
| Macquarie Global Income Opportunities Fd | 0.19 | 1.81 | 4.13 | 3.83 | 3.06 | |
| Macquarie Core Plus Australian Fxd Intr | 2.08 | 5.15 | 11.10 | 5.28 | 5.28 | |
| Mercer Global Credit Fund | 0.94 | 3.37 | 6.00 | 3.60 | 4.38 | |
| Mercer Global Sovereign Bond Fund | 1.20 | 3.08 | 7.23 | 4.07 | 5.67 | |
| Omega Global Corporate Bond | 1.47 | 3.34 | 5.13 | 3.04 | 3.85 | |
| PIMCO Global Bond Wholesale | mFund | 1.22 | 2.95 | 5.45 | 4.36 | 5.20 |
| PIMCO Global Credi Wholesale | mFund | 0.97 | 2.89 | 5.75 | 3.76 | 4.62 |
| PIMCO Diversified Fixed Interest Wholesale | mFund | 1.42 | 3.31 | 6.83 | 4.20 | 4.98 |
| PIMCO Unconstrained Bond Wholesale | mFund | 0.11 | 1.10 | 2.92 | 4.39 | 3.33 |
| State Street SSgA Global Fixed Income | 1.67 | 3.32 | 6.02 | 2.87 | 4.12 | |
| T.Rowe Price Dynamic Global Bond Fund | 2.27 | 2.24 | 3.00 | 2.00 | ||
| Templeton Global Bond Plus W | -1.05 | -1.20 | 3.76 | 3.71 | 1.43 | |
| UBS Global Credit Fund | 0.46 | 3.53 | 6.26 | 4.24 | 4.59 | |
| UBS International Bond | 1.08 | 2.95 | 5.55 | 3.17 | 4.45 | |
| Vanguard International Credit Securities Index Hdg | 1.10 | 3.53 | 6.28 | 3.87 | 4.49 | |
| Vanguard International Fixed Interest Index Hdg | 1.56 | 3.12 | 5.87 | 2.87 | 4.62 |
*End of May 2019. Returns in AUD after fees.