Conditions in October changed with those of September, becoming more challengingly 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 fell moderately. UK 10-year gilt yields rose modestly. The Aussie dollar was weaker against all major currencies.
October’s conditions may not have been as accommodating as September’s but over 80% of the funds in the survey still finished the month in front. 31 of the 38 funds in the YieldReport survey finished the month with a positive return. Of the 7 funds which produced negative returns, one fund produced a return of less than -1.00%.
The median 1 month performance in the YieldReport survey of global bond funds in October was +0.24% (September: +0.21%) while the median return over the 12 months including October came to +3.48% (September: +3.15%). The Barclays Global Aggregate Bond Index, a widely-used index in this sector, returned 0.01% in October and +4.28% over the rolling year (when hedged into Australian dollars).
In US markets, the 2-year Treasury yield had gained 4bps to 0.17%, the 10-year yield had increased by 20bps to 0.88% while the 30-year yield finished 21bps higher at 1.66%. BBB spreads tightened.
In other major bond markets, the German 10-year bund yield had lost 11bps to -0.63%, the French 10-year OAT yield had shed 10bps to -0.34% and the Italian 10-year government bond yield had dropped by 15bps to 0.72%. 10-year UK gilt yields finished the month 3bps higher at 0.26%.
The best performing global fund for the month in the YieldReport October survey was the Bentham Professional Global Income Fund. It produced return of +0.88% for the month following a second-quartile performance of +0.44% in September and a top-quartile performances of +1.30% in August.
The second-highest return was produced by the Legg Mason Brandywine Global Opportunistic Fixed Income Fund. Its return of +0.88% followed a near-worst-in-class returns of -0.80% in September and -1.21% in August.
In terms of fund performance for the twelve months to the end of October 2020, the T. Rowe Price Dynamic Global Bond fund took over the title as the highest performing fund. The fund produced a 12-month return of 8.07%, pushing the CFS Wholesale Global Corporate Bond Fund into second place after it returned 7.58%.
GLOBAL BOND FUNDS
| GLOBAL BOND FUNDS | ASX mFund | 1m (%) | 3m (%) | 1y (%) | 3y (%) | 5y (%) |
|---|---|---|---|---|---|---|
| Advance International Fixed Interest Multi-Blend | 0.04 | -0.21 | 2.59 | 2.94 | 2.68 | |
| Alpha Diversified Income | mFund | 0.42 | 0.93 | -1.47 | 2.30 | 2.46 |
| AMP Future Directions International Bond Fund | -0.04 | -0.61 | 3.39 | 3.61 | 3.40 | |
| AMP Capital International Bond | 0.00 | -0.49 | 3.95 | 4.14 | 3.93 | |
| ANZ-CFS Global Credit Income EF | 0.45 | 0.48 | -1.82 | -0.29 | 1.17 | |
| Ardea Real Outcome Fund | 0.54 | 1.21 | 5.74 | 5.84 | 5.09 | |
| Bentham Professional Global Income | mFund | 0.88 | 2.64 | 3.06 | 2.40 | 4.42 |
| Bentham Wholesale High Yield | mFund | 0.42 | 1.58 | -0.82 | 2.38 | 5.21 |
| Bentham Syndicated Loan ASX Class | mFund | 0.61 | 3.13 | -1.79 | 1.07 | 3.76 |
| Kapstream Wholesale Absolute Return Income | mFund | 0.29 | 0.61 | 0.98 | 2.21 | 2.60 |
| BlackRock Wholesale International Bond | 0.19 | 0.01 | 4.19 | 4.35 | 4.29 | |
| Pendal Enhanced Global Fixed Interest (Wholesale) | -0.27 | -0.69 | 4.03 | 4.50 | 3.68 | |
| CFS Wholesale Global Corporate Bond | 0.16 | -1.06 | 7.58 | 5.52 | 5.90 | |
| Dimensional Five-Year Diversified Fixed Interest | 0.14 | 0.22 | 1.12 | 1.94 | 2.47 | |
| Dimensional Global Bond Trust | 0.21 | 0.35 | 4.55 | 5.24 | 5.10 | |
| Dimensional Two-Year Diversified Fixed Interest | 0.08 | 0.18 | 1.19 | 1.67 | 1.88 | |
| Franklin Templeton Global Aggregate Bond Fund (W Class) | 0.72 | 0.84 | 3.10 | 4.77 | 3.20 | |
| Franklin Templeton Multisector Bond (Institutional) | 0.65 | 0.18 | -4.74 | -3.96 | -0.48 | |
| Invesco Wholesale Senior Secured Income | mFund | 0.15 | 2.33 | -1.67 | 1.16 | 3.41 |
| Legg Mason Brandywine Global Opp Fixed Income A | mFund | 0.88 | -1.14 | -0.10 | 2.09 | 3.67 |
| Legg Mason Western Asset Global Bond Fund | 0.29 | -0.09 | 4.02 | 4.09 | n/a | |
| Legg Mason Western Asset Macro Opportunities Bond Fund | -1.31 | -2.17 | 0.75 | 3.14 | n/a | |
| Macquarie Global Income Opportunities Fund | 0.62 | 0.96 | 1.81 | 2.89 | 3.46 | |
| Macquarie Core Australian Fixed Interest Plus Fund | 0.52 | 0.94 | 3.68 | 6.16 | 5.30 | |
| Mercer Global Credit Fund | 0.09 | -0.53 | 4.76 | 4.56 | 4.88 | |
| Mercer Global Sovereign Bond Fund | -0.11 | -0.48 | 2.79 | 5.36 | 5.04 | |
| Omega Global Corporate Bond | 0.09 | -0.98 | 3.64 | 3.88 | 4.23 | |
| PIMCO Global Bond (Wholesale) | mFund | 0.27 | 1.03 | 4.63 | 4.34 | 4.97 |
| PIMCO Global Credi (Wholesale) | mFund | 0.13 | 0.35 | 3.56 | 3.88 | 4.45 |
| PIMCO Diversified Fixed Interest Wholesale | mFund | 0.32 | 1.06 | 4.33 | 4.80 | 4.64 |
| PIMCO Unconstrained Bond (Wholesale) | mFund | 0.40 | 1.55 | 4.02 | 2.61 | 3.97 |
| State Street SSgA Global Fixed Income Trust | -0.01 | -0.29 | 4.24 | 4.83 | 4.30 | |
| T.Rowe Price Dynamic Global Bond Fund | 0.35 | -0.40 | 8.07 | 2.39 | 2.82 | |
| Templeton Global Bond Plus (Wholesale) | 0.85 | 0.34 | -5.84 | -1.57 | 0.43 | |
| UBS Global Credit Fund | 0.01 | -0.54 | 5.30 | 4.97 | 5.52 | |
| UBS International Bond | 0.04 | -0.18 | 3.80 | 4.28 | 4.26 | |
| Vanguard International Credit Securities Index (Hedged) | 0.41 | -0.24 | 3.87 | 4.53 | 4.79 | |
| Vanguard International Fixed Interest Index (Hedged) | -0.09 | -0.37 | 3.40 | 4.46 | 4.12 |
*End of October 2020. Returns in AUD after fees.