The median 1 month performance in the YieldReport survey of global bond funds was -0.19% (previously +0.69%) and the median return over the last 12 months was 1.73% (previously 2.09%).
September was unfavourable to global bond funds as yields in all major markets rose. However, the Australian dollar fell against major currencies with the exception of the yen and so the blow was softened for Australian investors. 28 of 43 funds in the YieldReport survey produced a positive return.
Yields dropped around the globe in the first week as investors sought low-risk assets, primarily because of geopolitical concerns. ECB discussions of possible cessation of bond purchases were largely overwhelmed by these fears, although yields did increase a little as markets digested the possibilities. Yields began to rise for the next two weeks as Americans appeared to be more confident in quitting their jobs and higher-than-expected consumer inflation in the U.K. A decidedly-hawkish tone of the BoE after an MPC meeting provided a greater impetus to higher yields and even weak U.S. retail sales figures were largely discounted due to Hurricane Harvey. Then the September FOMC meeting delivered the well-flagged intention to reduce re-investment of bond maturities. From this point bond yields started to drift lower to 2.75%-2.80% until President Trump’s tax plan was released and U.S yields rose quickly. News of the candidacy of noted hawk Kevin Warsh for the post of next Fed chair then sent U.S. yields a few points higher despite weak August PCE figures.
By the end of the month bond yields were higher in all major markets. Yields on German 10 year bonds increased by 10bps to 0.46%, U.K. yields jumped by 32bps to 1.36% and U.S. yields ran up by 21bps and finished at 2.33%.
The best performing global fund for September in the YieldReport survey was the Franklin Templeton Multisector Bond fund. Its return of 1.30% follows a sub-par effort in August (+0.13%) and a worst-in-class result in July (-0.66%). The second-highest return of 1.19% was produced by the Templeton Global Bond Plus Wholesale fund.
In terms of fund performance for the twelve months to September 2017, the Legg Mason Macro Opportunities Bond Fund produced the highest return with a return of 12.45%. This fund did well out of exposures to emerging market debt, investment-grade corporate debt as well as various currencies exposures despite an increase in duration from 2.2 years to 5.2 years.
GLOBAL BOND FUNDS
| GLOBAL BOND FUNDS | ASX mFund | 1m (%) | 3m (%) | 1y (%) | 3y (%) | 5y (%) |
|---|---|---|---|---|---|---|
| Advance International Fixed Interest Multi-Blend | -0.51 | 0.49 | 0.30 | 2.32 | 3.17 | |
| Alpha Diversified Income | mFund | -0.24 | 0.39 | 1.08 | 2.78 | 2.88 |
| AMP Future Directions International Bond Fund | -0.45 | 0.69 | 0.04 | 3.14 | 3.80 | |
| AMP Capital International Bond | -0.39 | 0.84 | 0.57 | 3.67 | 4.35 | |
| ANZ-CFS Global Credit Income EF | 0.52 | 0.80 | 4.30 | 2.59 | 3.87 | |
| Bentham Professional Global Income | mFund | 1.05 | 1.47 | 10.31 | 4.97 | 7.82 |
| Bentham Wholesale High Yield | mFund | 1.07 | 2.08 | 11.16 | 7.54 | 8.58 |
| Bentham Syndicated Loan ASX Class | mFund | 1.00 | 1.63 | 8.64 | 6.14 | 7.17 |
| Kapstream Wholesale Absolute Return Income | mFund | 0.20 | 0.76 | 2.69 | 3.06 | 3.82 |
| BlackRock Monthly Income | 1.08 | 1.65 | 5.81 | 3.66 | 6.39 | |
| BlackRock Wholesale International Bond | -0.19 | 1.15 | 1.11 | 4.56 | 5.29 | |
| BT Global Fixed Interest Wholesale | -0.77 | 0.54 | -1.88 | 3.96 | 4.25 | |
| BT Institutional Enhanced Global Fixed Interest | -0.77 | 0.57 | -1.75 | 4.14 | 4.43 | |
| CFS Wholesale Global Bond | -0.67 | 0.54 | -1.26 | 3.52 | 4.18 | |
| CFS Wholesale Global Corporate Bond | -0.09 | 1.19 | 2.97 | 5.28 | 6.14 | |
| Dimensional Five-Year Diversified Fixed Interest | -0.34 | 0.62 | 1.29 | 3.86 | 3.70 | |
| Dimensional Global Bond Trust | -0.83 | 0.88 | 0.29 | 5.10 | ||
| Dimensional Two-Year Diversified Fixed Interest | -0.11 | 0.39 | 1.87 | 2.40 | 2.71 | |
| Franklin Templeton Global Aggregate Bd W | -0.55 | -0.13 | -3.30 | 3.38 | ||
| Franklin Templeton Multisector Bond I | 1.30 | 0.76 | 11.90 | 2.29 | 4.99 | |
| GAM Absolute Return Bond (AU) | 0.65 | 1.10 | 7.47 | 3.82 | 3.78 | |
| Invesco Wholesale Senior Secured Income | mFund | 0.58 | 1.20 | 5.73 | 5.12 | 4.23 |
| Legg Mason Brandywine Global Opp Fixed Income A | mFund | 0.16 | 1.71 | 6.53 | 5.16 | 7.07 |
| Legg Mason Brandywine Global Fixed Income A | -0.07 | 1.66 | 6.25 | 4.69 | 6.49 | |
| Legg Mason Western Asset Global Bond Fund | -0.24 | 0.99 | ||||
| Legg Mason Western Asset Macro Opportunities Bond Fund | 0.59 | 2.46 | 12.45 | |||
| Macquarie Global Bond | -0.82 | 0.18 | -2.32 | 3.40 | 4.11 | |
| Macquarie Global Income Opportunities Fd | 0.32 | 0.94 | 4.46 | 3.06 | 3.99 | |
| Mercer Global Credit Fund | -0.28 | 0.99 | 1.64 | 4.93 | 5.59 | |
| Mercer Global Sovereign Bond Fund | -0.37 | 0.89 | 0.56 | 5.25 | 5.75 | |
| Nikko AM International Bond | -0.89 | 0.35 | -0.75 | 4.29 | 4.95 | |
| Omega Global Corporate Bond | -0.65 | 1.01 | 0.76 | 4.32 | 4.33 | |
| PIMCO Global Bond Wholesale | mFund | -0.16 | 1.49 | 3.01 | 5.77 | 5.72 |
| PIMCO Global Credi Wholesale | mFund | -0.14 | 1.26 | 2.74 | 5.29 | 5.39 |
| PIMCO Diversified Fixed Interest Wholesale | mFund | -0.27 | 0.68 | 1.11 | 4.75 | 4.72 |
| PIMCO Unconstrained Bond Wholesale | mFund | 0.38 | 1.67 | 7.83 | 3.71 | N/A |
| State Street SSgA Global Fixed Income | -0.60 | 0.64 | -0.96 | 3.59 | 4.39 | |
| T.Rowe Price Dynamic Global Bond Fund | 0.28 | 0.76 | 0.80 | 4.60 | ||
| Templeton Global Bond Plus W | 1.19 | 0.80 | 10.87 | 1.22 | 3.22 | |
| UBS Global Credit Fund | 0.04 | 1.59 | 3.17 | 5.31 | 5.65 | |
| UBS International Bond | -0.24 | 0.90 | 0.35 | 4.47 | 4.68 | |
| Vanguard International Credit Securities Index Hdg | -0.32 | 1.11 | 1.82 | 4.83 | 5.02 | |
| Vanguard International Fixed Interest Index Hdg | -0.66 | 0.50 | -0.84 | 4.43 | 4.80 |
*End of September 2017. Returns in AUD after fees.