The Pacific Coolabah Global Active Credit Fund performed in line with its benchmark for March. As of 31 March, the Fund’s weighted average yield to expected maturity is 5.78%, which compares favorably with the benchmark yield of 4.88%.
Despite global inflation readings continuing the trend observed so far this year of exceeding both economist expectations and central banks’ targets, both core yields and risk assets performed surprisingly strongly in March.
The 10yr US Treasury yield decreased by 5 basis points to 4.20% while 10yr German Bund yields declined by 11bps to 2.30%. Equity markets also seemed to disregard higher inflation prints, taking them as a signal of stronger economic activity with the S&P 500 up 3.2% on a total return basis and the NASDAQ 100 up 1.2%. European bourses returned in excess of 4% with the UK’s FTSE 100 index up 4.8% and the Eurostoxx 50 index up 4.4%. All returns are quoted on a total return basis.
Turning to credit markets, broad synthetic IG CDS indices were marginally tighter, although cash corporate bond indices outperformed. European issuers continued the trend of February outperforming their US peers with the average credit spread on European names tightening by 8bps to 1.12% and the corresponding US index tightening by 6bps to 0.89%.
March saw eagerly awaited Euro-denominated primary issuance from large US banks, JP Morgan and Morgan Stanley, which the Fund participated in. With such supply of Euro denominated debt having been sparse over recent years, both banks coincidentally came to market on the same day. During the month, the Fund also participated in deals issued by Bank of Ireland and Allied Irish Banks, which marked the Investment Manager’s first investments in Irish credits following an exhaustive fundamental credit research evaluation process.
