Conditions in September contrasted markedly with those of August for Australian investors in global bonds. Longer-term US Treasury bond yields finished the month a little lower. Yields in major euro-zone and UK markets fell more substantially. The Aussie dollar was weaker against all major currencies with the exception of sterling.
September represented a return to the favourable conditions of the June quarter and July, with around 75% of the funds in the survey finished the month in the black. 28 of the 38 funds in the YieldReport survey finished the month with a positive return. Of the 10 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 September was +0.21% (August: -0.44%) while the median return over the 12 months including September came to +3.15% (August: +2.19%). The Barclays Global Aggregate Bond Index, a widely-used index in this sector, returned 0.42% in September and +4.00% over the rolling year (when hedged into Australian dollars).
In US markets, the 2-year Treasury yield inched up 1bp to 0.13% while 10-year and 30-year yields both finished 3bps lower at 0.68% and 1.45% respectively. BBB spreads widened somewhat.
In other major bond markets, German 10-year bund yields finished the month 12bps lower at -0.52%, the French 10-year OAT yield lost 14bps to -0.24% while Italian 10-year BTP yields dropped by 22bps to 0.87%. The 10-year UK gilt yield finished the month 8bps lower at 0.23%.
The best performing global fund for the month in the YieldReport September survey was the Macquarie Core Australian Fixed Interest Plus Fund. It produced return of +0.96% for the month following a second-quartile performance of +0.03% in August and a third-quartile performances of +1.17% in July.
The second-highest return was produced by the Pendal Enhanced Global Fixed Interest (Wholesale) Fund. Its return of +0.78% followed a near-worst-in-class return of -1.19% in August and a fourth-quartile performance of +0.96% in July.
In terms of fund performance for the twelve months to the end of September 2020, the CFS Wholesale Global Corporate Bond Fund regained its title as the highest performing fund. The CFS fund produced a 12-month return of 7.93% while the T. Rowe Price Dynamic Global Bond Fund was next with a return of 7.72%.
GLOBAL BOND FUNDS
| GLOBAL BOND FUNDS | ASX mFund | 1m (%) | 3m (%) | 1y (%) | 3y (%) | 5y (%) |
|---|---|---|---|---|---|---|
| Advance International Fixed Interest Multi-Blend | 0.23 | 1.14 | 2.28 | 3.10 | 2.86 | |
| Alpha Diversified Income | mFund | 0.68 | 0.90 | -2.23 | 2.31 | 2.52 |
| AMP Future Directions International Bond Fund | 0.19 | 0.63 | 3.15 | 3.75 | 3.49 | |
| AMP Capital International Bond | 0.24 | 0.75 | 3.71 | 4.28 | 4.02 | |
| ANZ-CFS Global Credit Income EF | -0.29 | 0.47 | -2.11 | -0.28 | 1.23 | |
| Ardea Real Outcome Fund | 0.59 | 1.83 | 5.52 | 5.87 | 5.01 | |
| Bentham Professional Global Income | mFund | 0.44 | 3.31 | 2.07 | 2.44 | 4.28 |
| Bentham Wholesale High Yield | mFund | -0.39 | 4.82 | -1.11 | 2.40 | 5.67 |
| Bentham Syndicated Loan ASX Class | mFund | 0.40 | 4.14 | -2.67 | 1.13 | 3.68 |
| Kapstream Wholesale Absolute Return Income | mFund | 0.22 | 0.92 | 0.77 | 2.26 | 2.60 |
| BlackRock Wholesale International Bond | 0.47 | 1.71 | 3.59 | 4.36 | 4.43 | |
| Pendal Enhanced Global Fixed Interest (Wholesale) | 0.78 | 0.54 | 3.75 | 4.70 | 3.65 | |
| CFS Wholesale Global Corporate Bond | -0.39 | 1.23 | 7.93 | 5.73 | 6.05 | |
| Dimensional Five-Year Diversified Fixed Interest | 0.05 | 0.24 | 0.86 | 1.99 | 2.46 | |
| Dimensional Global Bond Trust | 0.57 | 1.54 | 4.07 | 5.43 | 5.13 | |
| Dimensional Two-Year Diversified Fixed Interest | 0.03 | 0.20 | 1.20 | 1.70 | 1.90 | |
| Franklin Templeton Global Aggregate Bond Fund (W Class) | 0.78 | 1.47 | 2.01 | 4.50 | 3.11 | |
| Franklin Templeton Multisector Bond (Institutional) | -0.01 | -0.93 | -5.87 | -4.31 | 0.07 | |
| Invesco Wholesale Senior Secured Income | mFund | 0.72 | 4.09 | -2.38 | 1.31 | 3.44 |
| Legg Mason Brandywine Global Opp Fixed Income A | mFund | -0.80 | 1.32 | 0.58 | 1.29 | 3.92 |
| Legg Mason Brandywine Global Fixed Income A | n/a | n/a | 0.17 | 1.68 | 3.63 | |
| Legg Mason Western Asset Global Bond Fund | 0.14 | 1.41 | 4.15 | 4.02 | n/a | |
| Legg Mason Western Asset Macro Opportunities Bond Fund | -1.31 | 3.52 | 5.32 | 3.26 | n/a | |
| Macquarie Global Income Opportunities Fund | 0.31 | 1.60 | 1.59 | 2.91 | 3.49 | |
| Macquarie Core Australian Fixed Interest Plus Fund | 0.96 | 1.59 | 2.71 | 6.51 | 5.43 | |
| Mercer Global Credit Fund | -0.11 | 1.98 | 4.73 | 4.74 | 5.01 | |
| Mercer Global Sovereign Bond Fund | 0.00 | 1.14 | 2.47 | 5.61 | 5.08 | |
| Omega Global Corporate Bond | -0.07 | 1.21 | 3.72 | 4.05 | 4.37 | |
| PIMCO Global Bond (Wholesale) | mFund | 0.48 | 2.35 | 4.27 | 4.43 | 5.11 |
| PIMCO Global Credi (Wholesale) | mFund | 0.16 | 1.85 | 3.65 | 4.01 | 4.65 |
| PIMCO Diversified Fixed Interest Wholesale | mFund | 0.76 | 1.92 | 3.80 | 5.00 | 4.72 |
| PIMCO Unconstrained Bond (Wholesale) | mFund | 0.06 | 2.06 | 4.13 | 2.57 | 4.04 |
| State Street SSgA Global Fixed Income Trust | 0.74 | 0.66 | 3.68 | 4.99 | 4.40 | |
| T.Rowe Price Dynamic Global Bond Fund | -0.72 | 0.65 | 7.72 | 2.26 | 3.12 | |
| Templeton Global Bond Plus (Wholesale) | 0.21 | -0.64 | -6.69 | -2.01 | 0.96 | |
| UBS Global Credit Fund | 0.03 | 1.92 | 5.78 | 5.21 | 5.70 | |
| UBS International Bond | 0.28 | 0.92 | 3.67 | 4.52 | 4.37 | |
| Vanguard International Credit Securities Index (Hedged) | 0.06 | 1.37 | 3.54 | 4.62 | 4.91 | |
| Vanguard International Fixed Interest Index (Hedged) | 0.69 | 0.50 | 2.90 | 4.67 | 4.19 |
*End of September 2020. Returns in AUD after fees.