The Pacific Coolabah Global Active Credit Fund outperformed its benchmark for January. As of 31 January, the Fund’s weighted average yield to expected maturity is 5.51%, which compares favorably with the benchmark yield of 4.73%.
In January, risk-free discount rates drifted a little wider over the month. 10-year government bond yields climbed in the UK (+26bps), Germany (+14bps), and the US (+3bps), which was a process that accelerated further at the start of February following a very strong payrolls print and some upside surprises to wages and inflation in the US.
This generally taxed the performance of long duration fixed-rate bond benchmarks: the Bloomberg Global Aggregate Corporate Index lost 0.05% in its USD hedged iteration or 0.06% in GBP. In contrast, the zero-duration version of the Bloomberg Global Aggregate Corporate Index appreciated 0.86%.
Most equity markets shrugged these higher long-term interest rates off with healthy returns registered in Europe (Eurostoxx 50 up 2.81%), the US (S&P500 up 1.59% and Nasdaq rising 1.85%), although the FTSE100 lost 1.33%. Cash credit spreads were similarly indifferent, compressing in Europe (-8bps), the UK (-8bps) and the US (-3bps).
Primary new issue markets were very active globally in January, throwing-up many opportunities. Coolabah evaluated attractive bond issues from Credit Agricole, BPCE, NatWest, BFCM, ABN Amro, KBC, and Rabobank in Europe; the likes of NAB, BPCE, ANZ, RBC, Morgan Stanley, JP Morgan, Bank of America, and BNZ in the US; and a range of deals in Asia.
