Conditions in May were a little challenging for Australian investors in global bonds. US Treasury bond yields moved very little except at the ultra-long end where they increased. UK gilt yields fell modestly and sovereign bond yields in major euro-zone markets were mixed. The Aussie dollar was several percent stronger against the US dollar, the euro and the yen.
However, as in April, the overwhelming majority of funds in the survey finished the month in the black. Only 4 of the 39 funds in the YieldReport survey finished the month with a negative return. Of the 35 funds which produced positive returns, just over one quarter of them produced a return of +2.00% or more.
The median 1 month performance in the YieldReport survey of global bond funds in May was +1.01% (April: +2.09%) while the median return over the 12 months including May came to +3.90% (April: +3.97%). The Barclays Global Aggregate Bond Index, a widely-used index in this sector, returned +0.40% in May and +6.37% over the rolling year (when hedged into Australian dollars).
In US markets, the 2-year Treasury yield fell by 3bps to 0.16%, the 10-year yield ticked up 1bp to 0.65% and the 30-year yield finished 13bps higher at 1.41%. BBB spreads contracted noticeably.
In other major bond markets, German 10-year bund yields finished the month 9bps higher at -0.45% while the French 10-year OAT yield remained unchanged at -0.07% and Italian 10-year government bond yields shed 28bps to 1.49%. The 10-year UK gilt yield finished 8bps lower at 0.18%.
The best performing global fund for the month in the YieldReport May survey was the Legg Mason Western Asset Macro Opportunities Bond Fund. It produced an excellent return of 4.43% for the month following a near best-in-class performance of 5.02% in April and a near worst-in-class performance of -10.93% in March.
The second-highest return was produced by the Bentham Wholesale High Yield Fund. Its return of +3.74% followed a top-quartile performance of +3.40% in April and a near worst-in-class return of -13.99% in March.
In terms of fund performance for the twelve months to the end of May 2020, the CFS Wholesale Global Corporate Bond took over the mantle from Pendal’s Enhanced Global Fixed Interest (Wholesale) fund to become the highest performing fund. The CFS fund produced a 12-month return of 9.44% while the Pendal fund was next with a return of 8.89%.
GLOBAL BOND FUNDS
| GLOBAL BOND FUNDS | ASX mFund | 1m (%) | 3m (%) | 1y (%) | 3y (%) | 5y (%) |
|---|---|---|---|---|---|---|
| Advance International Fixed Interest Multi-Blend | 0.90 | -0.72 | 3.95 | 2.58 | 2.21 | |
| Alpha Diversified Income | mFund | 0.32 | -6.64 | -0.68 | 1.84 | 2.13 |
| AMP Future Directions International Bond Fund | 0.81 | -0.11 | 5.37 | 3.48 | 3.15 | |
| AMP Capital International Bond | 0.84 | 0.02 | 5.92 | 4.01 | 3.68 | |
| ANZ-CFS Global Credit Income EF | 1.14 | -3.39 | -2.79 | -0.46 | 0.45 | |
| Ardea Real Outcome Fund | 0.39 | 0.21 | 5.94 | 5.12 | 4.25 | |
| Bentham Professional Global Income | mFund | 3.50 | -3.62 | -1.84 | 1.62 | 3.03 |
| Bentham Wholesale High Yield | mFund | 3.74 | -7.74 | -3.50 | 1.24 | 3.56 |
| Bentham Syndicated Loan ASX Class | mFund | 3.59 | -8.88 | -7.66 | -0.31 | 2.18 |
| Kapstream Wholesale Absolute Return Income | mFund | 0.31 | -2.00 | 0.35 | 2.10 | 2.36 |
| BlackRock Wholesale International Bond | 0.89 | -1.46 | 4.08 | 3.58 | 3.79 | |
| Pendal Enhanced Global Fixed Interest (Wholesale) | -0.08 | 0.62 | 7.82 | 4.57 | 3.91 | |
| CFS Wholesale Global Corporate Bond | 1.49 | 0.83 | 9.44 | 5.14 | 5.09 | |
| Dimensional Five-Year Diversified Fixed Interest | 0.16 | -0.06 | 1.44 | 1.98 | 2.60 | |
| Dimensional Global Bond Trust | 0.97 | -0.93 | 5.57 | 4.55 | 4.69 | |
| Dimensional Two-Year Diversified Fixed Interest | 0.31 | 0.33 | 1.46 | 1.69 | 2.00 | |
| Franklin Templeton Global Aggregate Bond Fund (W Class) | 2.09 | -2.46 | 4.86 | 3.59 | 3.05 | |
| Franklin Templeton Multisector Bond (Institutional) | 0.09 | -5.85 | -11.17 | -3.73 | -1.42 | |
| Invesco Wholesale Senior Secured Income | mFund | 3.47 | -8.96 | -7.89 | -0.43 | 1.70 |
| Legg Mason Brandywine Global Opp Fixed Income A | mFund | 3.51 | -1.49 | 0.92 | 1.64 | 2.14 |
| Legg Mason Brandywine Global Fixed Income A | 3.05 | -0.33 | 1.74 | 2.53 | 2.21 | |
| Legg Mason Western Asset Global Bond Fund | 1.62 | -0.50 | 6.20 | 3.87 | n/a | |
| Legg Mason Western Asset Macro Opportunities Bond Fund | 4.43 | -2.31 | 3.50 | 3.38 | n/a | |
| Macquarie Global Income Opportunities Fund | 1.18 | -3.38 | 0.84 | 2.33 | 2.61 | |
| Macquarie Core Australian Fixed Interest Plus Fund | 1.21 | -2.74 | 3.99 | 5.34 | 4.71 | |
| Mercer Global Credit Fund | 2.03 | -1.85 | 5.00 | 3.84 | 4.13 | |
| Mercer Global Sovereign Bond Fund | 0.98 | -0.12 | 6.91 | 5.37 | 5.11 | |
| Omega Global Corporate Bond | 0.71 | -1.31 | 5.45 | 3.71 | 3.85 | |
| PIMCO Global Bond (Wholesale) | mFund | 1.01 | -1.28 | 3.75 | 3.74 | 4.33 |
| PIMCO Global Credi (Wholesale) | mFund | 1.45 | -2.31 | 3.31 | 3.28 | 3.87 |
| PIMCO Diversified Fixed Interest Wholesale | mFund | 0.92 | -1.02 | 3.90 | 4.13 | 4.21 |
| PIMCO Unconstrained Bond (Wholesale) | mFund | 1.73 | -1.02 | -0.41 | 1.81 | 2.57 |
| State Street SSgA Global Fixed Income Trust | -0.12 | 0.59 | 6.98 | 4.76 | 4.45 | |
| T.Rowe Price Dynamic Global Bond Fund | 1.45 | 4.82 | 3.55 | 2.20 | 3.22 | |
| Templeton Global Bond Plus (Wholesale) | -0.12 | -5.40 | -6.84 | -1.29 | -0.53 | |
| UBS Global Credit Fund | 1.51 | -1.50 | 6.82 | 4.57 | 4.72 | |
| UBS International Bond | 0.55 | -0.84 | 5.10 | 4.09 | 4.05 | |
| Vanguard International Credit Securities Index (Hedged) | 1.14 | -2.29 | 4.79 | 4.02 | 4.22 | |
| Vanguard International Fixed Interest Index (Hedged) | -0.08 | 0.40 | 6.22 | 4.51 | 4.32 |
*End of May 2020. Returns in AUD after fees.