August, 2023
Global bond markets were marginally lower over August with both the Barclays Capital Global Aggregate Bond Index (Hedged) and FTSE World Government Bond (ex-Australia) Index (Hedged) returning -0.3%. Apart from Germany, where yields dropped (-2bps to 2.44%), ten-year bond yields moved higher across major jurisdictions including the US (16bps to 4.10%), UK (6bps to 4.37%) and Japan (6bps to 0.64%). Twoyear bond yields were similar, decreasing in Germany (-6bps to 3.04%), while increasing in the UK (17bps to 5.16%), US (1bp to 4.98%) and Japan (3bps to 0.03%).
Returns for most Australian bondholders were positive over August. In a bull steepening move, 10-year bond yields decreased slightly (-3bps to 4.02%), alongside five-year bond yields (-6bps to 3.77%) and two-year bond yields (-24bps to 3.81%).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/FP105-Advance-International-Fixed-Interest-Multi-Blend-Fund-Wholesale-Units-Aug-2023.pdfJuly, 2023
In July, global equity markets maintained current upward momentum with most regions delivering solid, positive returns. On the other hand, fixed income performance was mixed, although in this “risk on” phase of the cycle, riskier parts of the sector fared better.
A combination of further declines in headline inflation, resilient economic data, particularly from the US, and market expectations that the current interest rate hiking cycle is nearing an end, led to positive investor sentiment throughout the month.
The advanced Q2 2023 US GDP growth figure was reported late month, coming in at 2.4% and surprising market economist estimates of 1.8%. On the flipside, UK and Eurozone growth was close to flat. Benefitting from the base effects of emerging from its extensive 2022 Covid lockdown, China’s GDP growth rate was measured at an annualised 6.3%, though a little below 7.3% expectations. Forwardlooking composite purchasing manager indices (PMI) kept falling across the globe in July, with Japan the only region holding steady. PMIs for the services sector continue to outpace manufacturing though are easing towards 50, an important level that is considered the line between expansion and contraction.
Inflation data continued to decline, somewhat aided by the impact of last year’s energy price surge rolling off. US headline Consumer Price Index (CPI) fell to 3.0% p.a and is at the lowest level since early 2021. Similarly, CPI data across the UK, Eurozone and Australia, continues to show easing inflationary conditions, albeit at higher levels than the US. CPI has flatlined at near zero in China. Japan was the only major country that recorded a marginal increase in its inflation rate during Q2 2023. Central banks continued to err on the side of caution, increasing rates by 25bps in the US and Eurozone and 50bps in the UK, where inflation remains the highest among major developed economies.
Central banks continued to emphasise a data-driven approach to future rate adjustments. In the US, which is furthest ahead in the inflation cycle, markets are now pricing in a greater than 50% chance that the Fed’s policy rate has peaked and interest rate cuts maybe forthcoming in 2024.
Over July, Hedged Developed Markets Overseas Shares delivered a 2.8% return. US indices were broadly in line with international developed markets, however, Emerging Markets (unhedged) outperformed with a positive 4.9% return. Value modestly outperformed growth over the period, although when looking on a yearto-date basis, mega-cap tech stocks still dominate returns and has led to increased market concentration within that segment of global markets. In the US, with roughly half of S&P500 companies having reported their Q2 2023 earnings, FactSet currently projects a 7% quarter over quarter (QoQ) earnings decline, which would be the softest quarterly outcome since the height of Covid’s impact. That said, to date the majority of companies have reported better than expected earnings results.
Hedged Overseas Government Bonds returned -0.4% over the month, as bond yields across most regions increased in July. Yields on both key long bonds in the US (10-year and 30-year) rose by approximately 15bps over the month. Outside the US, Japan’s 10-year yield rose by around 19bps, which is noteworthy following the Bank of Japan’s announcement that it will further increase the upper tolerance range for the 10-year yield (now 1.0% vs 0.5% previously). The UK was the only major economy where the 10-year yield fell, albeit modestly.
Australian Shares returned 2.9%, marginally outperforming their overseas counterparts in July. Financials (4.9%) and Energy (8.4%) were the strongest sectors of the market, while Healthcare (-1.5%), and Materials (1.4%) detracted.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/FP506-Advance-International-Fixed-Interest-Multi-Blend-Fund-Retail-Units-Jul-2023.pdfJune, 2023
Global bond markets generated a negative return over June with the Barclays Capital Global Aggregate Bond Index (Hedged) returning -0.2% and the FTSE World Government Bond (ex-Australia) Index (Hedged) returning -0.3%. Most ten-year bond yields moved higher over the month, increasing in the UK (20bps to 4.38%), the US (16bps to 3.81%), and Germany (14bps to 2.41%), while decreasing in Japan (-3bps to 0.40%). Two-year bond yields mostly moved higher over the month, increasing in the UK (93bps to 5.26%), the US (40bps to 4.94%) and Germany (49bps to 3.19%), while decreasing in Japan (-2bps to -0.08%). Returns for most Australian bondholders were negative over June as 10-year bond yields (42bps to 4.03%), five-year bond yields (58bps to 3.95%) and two-year bond yields (64bps to 4.20%) increased.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/FP105-Advance-International-Fixed-Interest-Multi-Blend-Fund-Wholesale-Units-Jun-2023.pdfApril, 2023
In April, risk asset returns in developed markets were mostly positive, while defensive assets also provided modest gains. Emerging market equities were lower than their developed market counterparts due to the weakness in Chinese stocks.
News flow during April was fairly quiet until the last week of the month when banking concerns resurfaced, as First Republic Bank came under pressure and was ultimately acquired by J.P. Morgan. Equity market volatility ended the month at its lowest level since late-2021, despite a brief spike during the last week of the month. Major economies remained resilient, driven largely by service activity. US GDP for Q1 2023 rose at a 1.1% annualised rate, which was below expectations.
Consumer confidence remained on the rise and labour markets remained tight, in spite of high profile layoffs in the US. Headline inflation continued to decline in major economies, reaching 5.0% in the US, its lowest level since mid-2021. In the UK, inflation fell by less than expected and remained above 10.0%, the highest rate in major developed economies. The People’s Bank of China and Reserve Bank of Australia left key lending rates unchanged. Over April, Hedged Developed Markets Overseas Shares returned 1.6%. Even though the US earnings season delivered a fair number of positive EPS surprises relative to expectations, the earnings decline over the first quarter is set to be the largest since the second quarter of 2020. Returns were positive for most sectors with Consumer Staples delivering the largest gains for the month. Value outperformed growth among large- and mid-cap stocks, while growth outperformed among small-caps. Emerging Market Shares (UH) underperformed unhedged Overseas Shares in April. Weakness in China outweighed the better performance from India and Brazil. Hedged Overseas Government Bonds returned 0.2% over the month as bond yields generally saw modest changes for most countries during the month. In the US, the 10-year bond yield fell by 4bps, while the 30-year yield was flat. In developed markets outside the US, 10-year yields rose by 6bps for Japan and 23bps for the UK. US inflation expectations, as measured by the 10-year inflation breakeven rate, fell from 2.3% to 2.2%.
Australian Government Bonds were flat over the month. Lending conditions remain somewhat stressed due to banking concerns but bond markets have remained fairly calm. Credit spreads generally declined during the month, with investment-grade spreads falling 2bps and high yield spreads declining 3bps. Australian Shares returned 1.8%, underperforming their overseas counterparts in April. Real Estate (5.2%) and IT (4.5%) were the strongest sectors, meanwhile Materials (-2.6%) and Utilities (1.4%) were the largest detractors.
Global bond markets generated a positive return over April with the Barclays Capital Global Aggregate Bond Index (Hedged) returning 0.4% and the FTSE World Government Bond (ex-Australia) Index (Hedged) returning 0.2%. Most ten-year bond yields moved slightly higher over the month, increasing in the UK (23bps to 3.72%), Germany (2bps to 2.32%), and Japan (3bps to 0.36%), while decreasing in the US (-5bps to 3.43%). Most two-year bond yields also rose over the month, increasing in the UK (34bps to 3.78%) and Germany (5bps to 2.79%) while decreasing in the US (- 5bps to 4.09%) and remaining unchanged in Japan at -0.05%. Returns for most Australian bondholders were marginally positive over April despite 10-year bond yields increasing (4bps to 3.34%), five-year bond yields (4bps to 3.07%) and two-year bond yields remaining unchanged at 3.08%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/FP105-Advance-International-Fixed-Interest-Multi-Blend-Fund-Apr-2023.pdfMarch, 2023
The Advance International Fixed Interest Multi Blend Fund underperformed the benchmark by 32bps during the month of March. Relative manager performance was mixed over the month, with Western outperforming the benchmark, whilst Wellington, PIMCO and Standish delivered negative excess returns. Standish delivered negative excess returns relative to the benchmark over the month.
The bulk of the period’s relative underperformance can be attributed to the underweight positions across developed market rates, and credit allocation overweights to Financials, Banks, and REITS as the collapse of two regional banks and as banking sector concerns put upward pressure on financials related spreads. PIMCO underperformed the benchmark with the contributors being the overweight positions to Australian, Korean and Singaporean duration (as yields rallied), while the detractors largely stem from underweight positions across US and European duration added with overweight positons across non-agency mortgages. Wellington underperformed the benchmark over the month as the macro strategies detracted.
Duration, country, currency and yield curve strategies all contributed to the underperformance. Western delivered a positive excess return in March. Duration and yield-curve positioning had a positive impact on the performance as yields fell over the month. An underweight to the US dollar added to the return as well. An overweight to European financials detracted as spreads widened sharply. It was another volatile month for the financial markets in March.
Government bond yields declined significantly over the month, largely due to bank failures in the US and the rescue takeover of Credit Suisse leading to concerns about financial stability. Inflation continued to show signs of moderating in many parts of the world but remains the key concern for most developed market central banks. Economic activity has tended to soften, and major central banks increased interest rates once more, but the rhetoric surrounding those decisions became less hawkish.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Advance-International-Fixed-Interest-Multi-Blend-Fund-factsheet-16.pdfFebruary, 2023
The Advance International Fixed Interest Multi Blend Fund underperformed the benchmark by 7bps during the month of February. Relative manager performance was negative over the month, with Wellington, PIMCO and Standish all outperforming the benchmark, whilst WAM delivered negative excess return. Standish delivered a positive excess return, with most of the alpha attributable to active positioning in developed rates markets. In spread sectors, active intra-sector positioning supported relative returns as overweights in ABS and REITs outperformed. PIMCO delivered performance that was in line with the benchmark.
The fund’s positioning to US and European duration (as yields fell across the curve) added to relative returns, while an overweight towards Australian duration detracted as yields rose. Wellington underperformed the benchmark over the month. While the duration strategy contributed, country, currency and yield curve strategies were detracted. Western underperformed the benchmark over the month. An overweight duration in the US, core European and UK detracted as global government bond yields rose. An overweight to corporate bonds and the currency positioning detracted as well. The fixed income markets traded with mixed results for the month of February as government bond yields generally rose and credit markets struggled to make an impact, with relatively limited moves in credit spreads. Overall, risk markets moved little in February after higher volatility in previous months. Most major central banks raised interest rates early in the month, all of which were expected. Inflations continued to slacken, led by softer energy prices. However, certain upward influences such as higher food prices continue to retain the attention of policymakers who remain concerned for the potential of a renewed uptick in inflation data.
In Europe, the European Central Bank (ECB) increased interest rates by 50bp in early February taking the benchmark rate to 3.0%, a 15-year high. ECB President Christine Lagarde reiterated the hawkish stance of eurozone policymakers by saying a further 50bp increase is planned for the March meeting. Headline inflation fell back in January, though the core measure edged higher. The Bank of England also hiked rates by 50 basis points and accompanied by a dovish statement. In the US, the Federal Reserve increased official rates once more, as was widely expected, but policymakers opted to hike by just 25bp, which might signal a deceleration in monetary tightening.
While recent improvements in inflation may pave the way for a softer approach, meeting minutes showed the Federal Open Market Committee believes risks to inflation remain skewed to the upside and that it would not consider lowering rates “until inflation is clearly on a path to 2%.” Feb members, including Chair Powell, pushed a potential “higher for longer” narrative following strong US economic data.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Advance-International-Fixed-Interest-Multi-Blend-Fund-factsheet-15.pdfJanuary, 2023
The Advance International Fixed Interest Multi Blend Fund outperformed the benchmark by 16bps during the month of January. Relative manager performance was positive over the month, with WAM, PIMCO and Standish all outperforming the benchmark, whilst Wellington delivered negative excess return. Standish outperformed the benchmark marginally, with most of the alpha attributable to active positioning in Emerging Market local rates, US Agency Mortgages and corporate credit markets.
Active positioning in developed market rates and European sovereign debt markets detracted. PIMCO delivered positive excess returns with the contributors being a long exposure to securitized credit and an overweight exposure to financial corporates as spreads tightened. An overweight exposure to inflation linked securities and an overweight exposure to covered bonds detracted as inflation expectations eased. Wellington underperformed the benchmark over the month. While the currency strategy contributed, duration and country strategies were negative detractors. Western outperformed the benchmark over the month. An overweight duration in the US, core European and UK contributed strongly as yields fall.
Overweights in investment-grade and high-yield corporate bonds also added to returns. Government bonds strengthened as yields declined in most major markets in January. Most larger central banks did not hold rate-setting meetings during the month, resulting in no changes to interest rate policy. Inflation, which remained the primary concern of most central banks, generally fell back slightly, though markets continued to anticipate more interest rate increases despite the fragile global economic outlook. Warmer weather in Europe, lower natural gas prices, and China’s reopening added to the optimism.
In Europe, headline eurozone inflation fell back more than expected in January, declining to 9.2% from 10.1%, but core inflation continued to increase. There was no rate-setting meeting of the European Central Bank (ECB) in January but ECB policymakers continued with hawkish rhetoric, calling for rate increases to be continued and for some time.
Minutes from the December meeting showed some members called for a third successive 75bp increase, but the consensus agreed on 50bp. In the UK, the Bank of England (BoE) noted that labour market indicators were loosening, and data indicated sluggish economic activity. In the US, continued hawkish rhetoric emanating from the Federal Reserve (Fed) led the market to anticipate another, albeit smaller, rate hike in early February. Inflation continued to decline and initial data for GDP growth for Q4 2022 was a little better than had been expected at 2.9%, but still weaker than in Q3.
Forward-looking indicators of economic activity seemed to confirm a softer tone, suggesting that the effects of higher interest rates is being reflected in the real economy. In Federal Open Market Committee’s (FOMC) meeting minutes released earlier in the month, the Fed reiterated their resolve to bring down inflation. The Fed commented that the move from 75 to 50 basis points “was not an indication of any weakening of the committee’s resolve to achieve its pricestability goal”.
Fed officials’ median projections for the appropriate path of interest rates also revealed that none of the Fed officials expect that it will be appropriate to cut interest rates in 2023. This is at odds with market pricing. The US 10-year and 2-year yields decreased by 37 bps and 22 bps to 3.51% and 4.2% respectively. Global credit bonds outperformed in January as spreads tightened, with all sectors outpacing treasuries on a duration-equivalent basis.
Corporate credit posted a strong month, led by the high yield cohort with 218 bps of positive excess returns, while investment grade corporates bested duration-matched Treasuries by 120 bps. Securitized sectors were also positive, led by agency MBS given a reduction in rate volatility, followed by CMBS and ABS. The Bloomberg Barclays Global Aggregate Bond Index returned a positive 2.10% over the month, bringing the one-year performance to -8.94%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Advance-International-Fixed-Interest-Multi-Blend-Fund-factsheet-14.pdfDecember, 2022
Relative manager performance was positive over the month, with all four managers, Standish, Wellington, PIMCO and WAM, outperforming the benchmark. Standish outperformed the benchmark, with most of the alpha attributed to active positioning in the developed market rates space. Relative underweights in US, German and Canadian duration all contributed. PIMCO also delivered positive excess returns with the contributors being overweight exposures to financial corporate and long exposures towards securitized credit as spreads tightened. Underweight exposure to non-financial investment grade credit however detracted.
Wellington outperformed the benchmark over the month. While the duration, currency and yield curve strategies contributed, country strategies however detracted. Western slightly outperformed the benchmark over the month. The yield-curve positioning, currency positioning, and an underweight to Japanese duration contributed. However, an overweight to US, UK and core European duration and an overweight to US high-yield corporate bonds detracted. Government bond markets were broadly weaker in December and yields ended the month higher, as a result of hawkish central bank announcements, action by the Bank of Japan (BoJ) towards the end of the month and developments in China’s management of Covid. Chinese officials eased several Covid related restrictions, which is expected to see economic activity improve despite new Covid case numbers rising sharply. This combined with signs that inflationary pressures are easing saw risk sentiment improve. The Bank of Japan broadened the tolerance for its yield curve control target band on the 10yr JGB yield from 25bps to 50bps. This leaves the yield curve control now +/- 50bps around 0%. The BoJ messaged this decision around removing yield curve shape distortions and providing more flexibility around achieving their inflation target of 2%. However, the move surprised the market driving yields higher globally as the expectation is now that the BOJ will need to hike rates to curb their rising inflation.
In Europe, European Central Bank (ECB) raised rates by 0.5 percentage points following two previous hikes of 0.75 percentage points, taking the refinancing rate to 2.5% and the deposit facility rate to 2.0%. Previously the ECB had stated that it expected inflation to stay above its mid-term target of 2% for the next three years, while ECB President Christine Lagarde emphasised that rates will rise for some time to come, saying markets could expect “another 50 basis-point rise at our next meeting and possibly at the one after that, and possibly thereafter.” The ECB also said it would begin quantitative tightening beginning in March 2023.
The eurozone experienced its first decline in annual inflation for 2022 in November. In the US, the Federal Reserve (Fed) tightened monetary policy once again in December, taking the Fed Funds rate to 4.25%-4.50%. Fed Chair Jerome Powell had indicated policymakers could moderate the pace of interest rate hikes and the smaller rate hike was widely anticipated. Consumer inflation fell back for the fifth consecutive month, and by more than expected. There was also some modestly positive labour market news as non-farm payrolls data early in the month exceeded market expectations. The Fed lowered its GDP forecast for 2023 and raised its inflation forecast, though the recent fall in inflation has encouraged the hope that the extent and pace of future rate hikes will become more muted. US core CPI fell to its lowest in over a year, and YoY reading for headline CPI came in at +7.1% in November, vs. +7.3% expected. The US 10-year and 2-year yields increased by 27 bps and 12 bps to 3.87% and 4.43% respectively.
Global credit market performance was mixed in December. With rates higher across the yield curve, the broader fixed income market posted negative returns, though credit spreads fell marginally across most sectors. High yield bonds started the month positively on optimism that inflation may be cooling before hawkish Fed rhetoric weighed on the asset class over the latter half of December. Bloomberg US Aggregate Index ended the month down -0.45%. Within the securitized sectors, agency mortgage-backed securities, commercial mortgage-backed securities, and asset-backed securities outperformed the duration-equivalent government bonds. The Bloomberg Barclays Global Aggregate Bond Index returned a negative -1.31% over the month, bringing the one-year performance to -12.28%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Advance-International-Fixed-Interest-Multi-Blend-Fund-factsheet-13.pdfNovember, 2022
The Advance International Fixed Interest Multi Blend Fund outperformed the benchmark during the month of November. Relative manager performance was positive over the month, with all the four managers, Standish, Wellington, PIMCO and WAM, outperforming the benchmark.
Standish outperformed the benchmark, with most of the alpha attributed to the active positioning in local emerging markets bonds and the overweight to credit beta in spread sectors. The strategy’s underweight to UK duration was the single most significant source of negative alpha on the period.
PIMCO delivered a positive excess return with the contributors being the modest overweight exposure to emerging market external debt, as spreads tightened, and the detractors being the underweight exposure to non-financial investment grade credit.
Wellington slightly outperformed the benchmark over the month, with its macro strategies and currency and yield curve strategies contributed.
Duration and country strategies were negative. Western outperformed the benchmark over the month as well. While overweights to US & UK duration, local & hard currency EM government bonds, as well as corporate bonds contributed, the US yield-curve positioning detracted modestly.
There was a pronounced shift in sentiment in November. While inflation remained at the forefront of policymakers’ and investors’ minds, weakening inflation indicators, global growth concerns and the prospect of future policy rate cuts led to a more balanced and supportive macroeconomic backdrop for fixed income market. Weaker-than-expected October Consumer Price Index (CPI) inflation data in the US acted as a catalyst for a sharp rally in global fixed-income markets.
Most global sovereign yields declined on signs of easing inflation across major economies. In the UK, the Bank of England (BoE) hiked the Bank Rate by 75 bps to 3.00% and began its scheduled sale of UK gilt holdings, while the Chancellor of the Exchequer, Jeremy Hunt, unveiled the full autumn budget, which saw a fiscal consolidation of £55 billion.
In Europe, the initial estimate for eurozone headline inflation fell back to 10% in November, a greater decline than expected. Consumer confidence in the eurozone improved notably in November, reflecting a similar solid improvement in the ZEW Economic Sentiment Index in a much better outcome than had been anticipated by the market. Eurozone yields dropped following below-consensus CPI data, despite hawkish rhetoric by the European Central Bank policymakers and an anticipated rate hike in December.
In the US, the Federal Reserve (Fed) increased the Federal Funds rate to 3.75%-4%, the highest level since 2008. The raise was the sixth successive rate hike and the fourth consecutive increase of 75bp. As the move had largely been expected by the market, much attention was focused on the accompanying statement which warned that rates would likely need to rise further and that they might peak at a higher level than currently expected. The Federal Open Market Committee (FOMC) meeting minutes indicated a growing consensus around the need to slow the pace of policy rate hikes, a view emphasized by Fed Chair Jerome Powell in a speech at the end of the month.
Headline inflation declined for the fourth successive month, reaching 7.7% in October, while the expectations were at or above 8%. Manufacturing data fell once more. Consumer confidence data also declined given an environment of rising borrowing costs, declining asset values and weakening labour market expectations, in addition to the ongoing influence of inflation. The US 10-year and 2-year yields fell 44 bps and 17 bps to 3.61% and 4.31% respectively.
Global credit bonds outperformed duration-equivalent government bonds as spreads tightened. The decline in yields for the month drove positive total returns across the spectrum, with the Bloomberg US Aggregate Index up 3.7%. Corporate credit led with a return over 5%, outpacing durationmatched Treasuries by over 210 bps. Within the securitized sectors, securitized sectors were led by agency MBS, up 4% and outpacing Treasuries by 135 bps, while CMBS gained 2.6%. ABS was up a more modest 1%, but trailed Treasuries by 8 bps, weighed down by auto receivables.
The Bloomberg Barclays Global Aggregate Bond Index returned a positive 2.37% over the month, bringing the one-year performance to -11.51%
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Advance-International-Fixed-Interest-Multi-Blend-Fund-factsheet-12.pdfOctober, 2022
The Advance International Fixed Interest Multi Blend Fund outperformed the benchmark during the month of October. Relative manager performance was positive over the month, with all the four managers, Standish, Wellington, PIMCO and WAM, outperforming the benchmark. Standish outperformed the benchmark, with most of the alpha attributed to active positioning within the developed market rates space. The strategy’s active positioning within local emerging markets was another driver of positive performance with underweights in Central Eastern Europe and overweights in South Africa both performing well. PIMCO delivered a positive excess return with the contributors being underweight US durations (as rates rose) and the positioning within European rates.
The key detractors however were underweight positions in non-financial investment grade corporates as spreads tightened. Wellington also outperformed the benchmark over the month, with its duration and yield curve strategies contributing. Currency strategies were negative, while country strategies were neutral. Western outperformed the benchmark over the month as well. While overweights to UK duration, hard currency EM government bonds, and corporate bonds contributed, a steeper US yield curve detracted. It was another volatile month in October with mixed government bond markets, which generally weakened against an ongoing backdrop of inflation and increased monetary tightening. Policymakers continue to assess the trade-off between reducing inflation and maintaining economic growth. Global government bond yields traded over a wide range during the month and posted mixed returns. Major central banks continued to raise rates. In Europe, the European Central Bank (ECB) increased interest rates by 75bp as had been widely expected, taking the refinancing and deposit facility rates to the highest rates since 2009. The hikes accompanied warnings of further increases to come, as inflation remained “far too high,” reflecting continued increasing inflation in the broad eurozone. The Bank of Canada (BoC) raised their overnight rate by a less than expected 0.50% to 3.75%. BoC Governor Macklin noted that ‘this tightening phase will draw to a close. We are getting closer, but we aren’t there yet’. In the United Kingdom, the new Chancellor reversed the tax cuts plan of his predecessor, which helped settle gilt markets and propel a market recovery as yields fell sharply. The Bank of England (BoE) announced that they would be intervening in the gilt market. The BoE stated that the move was necessary as ‘the prospect of self-reinforcing ‘fire sale’ dynamics pose a material risk to UK financial stability’ and was driven by feedback that the need to liability driven investment funds to deleverage would accelerate and greatly exaggerate instability. The BoE also confirmed that Quantitative Tightening (balance sheet reduction) would begin at the end of October. There had been some speculation that bond sales may have been delayed given the market turmoil.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Advance-International-Fixed-Interest-Multi-Blend-Fund-factsheet-11.pdfSeptember, 2022
The Advance International Fixed Interest Multi Blend Fund underperformed the benchmark by 20bps during the month of September.
Relative manager performance was mixed over the month with Standish and Wellington outperforming the benchmark, whilst PIMCO and WAM detracted.
Standish outperformed the benchmark, with a majority of the alpha attributed to active yield curve and duration positioning in developed markets. More specifically, the strategy benefitted significantly from underweights in the US, the UK and the European government bond markets.
PIMCO delivered a slight negative excess return with Euro Bloc rates positioning and modest long exposures to developed market currencies offsetting the positive contributions from underweight US and UK durations.
Wellington outperformed the benchmark over the month, with its duration strategies contributing. Currency and yield curve strategies were negative, while country strategies were neutral.
Western underperformed the benchmark over the month. While overweight positions in US, UK and Australian duration detracted from returns, a flatter US yield curve was additive. Overweights to EM government bonds and to corporate bonds detracted. Currency positioning also detracted as the US dollar strengthened.
It was another volatile month in September across fixed-income markets and global bond yields continued to rise. Global central banks continued fight against inflation led markets to raise policy rate forecasts. Lower energy prices and a moderation of future inflation expectations did little to assuage macroeconomic uncertainty amid growing recession concerns.
Persistent inflation and tighter monetary policies resulted in negative returns across most global sovereign markets. Central banks across most developed markets reinforced their hawkish intentions and expressed a willingness to keep policy in restrictive territory, even in the face of slower growth and weaker labour markets. In Europe, the European Central Bank (ECB) also raised rates by 75bp. Inflation in the eurozone increased by 9.1%, year over year. ECB President Christine Lagarde noted that central bank would need to keep hiking rates over several meetings to get inflation back under control.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Advance-International-Fixed-Interest-Multi-Blend-Fund-factsheet-10.pdfAugust, 2022
The Fund outperformed the benchmark during the month of August. Relative manager performance was mixed over the month with PIMCO, Standish and Wellington outperforming the benchmark, whilst WAM detracted at the margin. Standish outperformed the benchmark, with a majority of the alpha attributed to positioning in developed market rates, e.g. underweights in US, European, Canadian and UK duration. Positioning in spread sectors was a modest negative in aggregate. PIMCO also delivered a positive excess return with the contributors being underweight US and UK durations as yields rose and overweight exposure to securitized credit. Wellington performed in line with the benchmark, with its duration and country strategies being the primary contributors, while currency and yield curve strategies were negative. Western underperformed the benchmark over the month. While a flatter US yield curve and an underweight to core European duration added to returns, an overweight to local Mexican and Polish government bonds detracted.
August was another volatile month with increased market expectations for more rate hikes over the remainder of this year, coupled with diminishing expectations for rate cuts in 2023. Slowing growth, an intensifying energy crisis, and steadfast hawkish remarks from major central banks to combat unyielding inflation elicited a sharp increase in sovereign yields, weighing on fixed income markets. Most global sovereign yields rose sharply, particularly in Europe, on higher-than-expected inflation and continuing hawkish narrative from major central banks. The Bank of England (BoE) hiked the Bank Rate by 50 bps to 1.75%, the largest hike since 1995. UK inflation data released subsequently exceeded expectations at 0.6% in July and seeing the annual inflation rate at 10.1%. The European Central Bank (ECB) also hit the headlines late in the month with reports emerging that some members of the Governing Council want to discuss a 75 bps point increase at their September meeting. Attending the Jackson Hole summit, two members of the Governing Council also warned that a larger sacrifice will be needed to tame inflation and that price growth risks risk spinning out of control. Energy prices continued to surge in Europe and inflation increased further, reaching 9.1% in its initial reading for August up from 8.9% in July. In the US, strong labour market data and hawkish rhetoric from several Federal Open Market Committee (FOMC) members added additional upward pressure on US Treasury yields. In Federal Reserve (Fed) Chair Jerome Powell’s speech at the Jackson Hole symposium, he reiterated that US policymakers “must keep at it until the job is done,” implying that interest rate increases will continue, adding that successfully controlling inflation is likely to restrain economic growth “for some time.” Inflation did decline in July at the headline level, falling back more than had been expected, to 8.5%, from 9.1%, while the core rate remained steady at 5.9%. The yield curve inverted further as short rates raced higher in anticipation of additional central bank tightening, with the U.S. 2-Year yield up 61 bps to 3.5%, while the U.S. 10-Year yield rose by 54 bps to 3.2%. It was a volatile month for spread sectors. The risk appetite remained fragile because of the macroeconomic uncertainty and the instability in government bond markets. Global credit bonds slightly outperformed duration-equivalent government bonds as US spreads tightened modestly. In the securitized sectors, the risk-on rally in the early parts of the month helped propel non-agency CMBS and ABS to positive excess returns, with yield spreads across both legacy and non-agency MBS also tightening throughout August. Agency MBS and CMBS, however, fared worse amid the rising rates and hawkish rhetoric in the latter half of the month as both trailed duration-matched Treasuries. The Bloomberg Barclays Global Aggregate Bond Index returned a negative -2.72% over the month, bringing the one-year performance to -10.53%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Advance-International-Fixed-Interest-Multi-Blend-Fund-factsheet-9.pdfJuly, 2022
The Advance International Fixed Interest Multi-Blend Fund outperformed the benchmark during the month of July. Relative manager performance was mixed over the month with WAM, PIMCO and Standish outperforming the benchmark, whilst Wellington detracted at the margin. Western positioned correctly from both duration and currency perspectives. An overweight to EM government bonds and corporate bonds also contributed. Standish slightly outperformed the benchmark, with the active risk positions making positive contributions during the month. The significant source of positive alpha was an overweight to investment grade credit as spreads in this portion of the market tightened aggressively. PIMCO also delivered a slightly positive excess return with the contributor being overweight exposure to financials as spreads tightened and the detractors being underweight in US duration and non-financial investment grade corporate credit. Wellington underperformed the benchmark, with its duration strategies being the primary detractor. While currency and credit strategies were positive, country and yield curve strategies were marginally negative over the month. Despite ongoing concerns around inflation, recessionary fears and central bank tightening, markets managed to stage a solid rebound in July.
Global government bond yields fell as fears over weakening global growth were amplified. Inflation data continued to surpass expectations, while falling commodity prices raised hopes of a potential easing in inflation and a slowdown in the pace of monetary tightening. Russia appears to be limiting supplies significantly, leading European policymakers to step up their plans for rationalising gas usage across the continent in the months ahead and increasing concerns for a European recession. Most global sovereign yields declined on recession fears, even as major central banks continued front-loading their hiking cycles. The European Central Bank (ECB) raised interest rates for the first time in 11 years with an increase of 50 bps, above the 25bps expected, taking the deposit facility rate back to zero from -0.5%. Headline inflation across the eurozone rose to 8.6% in June from 8.1%. The ECB’s announcement of a new policy tool, the Transmission Protection Instrument (TPI) was a positive tailwind, while concerns over Russian gas supplies to Europe were omnipresent. In the US, the Federal Open Market Committee (FOMC) hiked the federal funds rate with a second consecutive 75bps increase to 2.25%-2.50%, in line with market expectations. Federal Reserve (Fed) Chair Jerome Powell acknowledged the slowdown in economic activity, that the policy rate was now “in the range of what the FOMC think is neutral” and that it will “become appropriate to slow the pace of increases” as monetary policy tightens further. The hike came after another large increase in headline inflation, to 9.1% for June, the highest level since 1981. Bond yields traded in a wide range during the month with the longer end of the curve outperforming. 10-year bond yields traded in a 50 bps range, peaking at 3.08% before rallying over the second half of the month to end 36 bps lower at 2.65%. 2-year yields in the US traded in a 42 bps range and ended the month 7 bps lower in yield at 2.88%. Corporate credit bonds also improved during the month as spreads tightened. Investment grade credit gained over 3.0% for the month and outpaced duration-matched Treasuries by 94 bps. Nearly every corporate sector posted positive excess returns, led by railroads, aerospace/defence, food & beverage, and restaurants. High yield corporates rallied 5.9% with positive excess returns of 434 bps, supported by a strong technical backdrop. In the securitised sectors, agency MBS outperformed duration-matched Treasuries by 129 bps, marking the highest monthly excess return in history, while yield spreads tightened by 19 bps as interest rates reversed course and fell for the month. Meanwhile, ABS trailed Treasuries by 10 bps and yield spreads widened by 7 bps while CMBS performed largely in line with Treasuries. The Bloomberg Barclays Global Aggregate Bond Index returned a positive 2.49% over the month, bringing the one year performance to -8.23%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Advance-International-Fixed-Interest-Multi-Blend-Fund-factsheet-8.pdfJune, 2022
The Advance International Fixed Interest Multi-Blend Fund underperformed the benchmark during the month of June. Relative manager performance was mixed over the month with Wellington flat versus the benchmark whilst PIMCO, WAM and Standish all detracted at the margins. Wellington positioned correctly from a duration and yield curve perspective. While country strategies were neutral, currency strategies detracted over the month.
Western underperformed the benchmark with positioning in country allocation strategies not working in the manager’s favour. Overweight allocations to EM bonds and currencies, as well as European financial issuers detracted from performance. Insight underperformed the benchmark with the most material drag being an overweight to Australian duration versus that of the UK as the spread between the two markets moved steadily wider. PIMCO also delivered negative excess returns with the detractor being overweight exposures to financials and securitized credit, particularly non-agency RMBS, where spreads widened.
It was another volatile month in fixed-income markets. High energy prices, the Ukraine war and Covid related supply side bottlenecks and tight labour markets have continued to drive inflation higher globally. Global government bond yields continued to move higher following ongoing monetary policy tightening intentions in response to persistent inflation pressures. While inflation remained the dominant theme, an increasing number of activity indicators disappointed during the month across the US, UK, and Europe, adding to growing fears over the global growth outlook. Global sovereign yields moved sharply higher as most major central banks supercharged their hiking cycles. The Bank of England raised the bank rate by a further 25 bps as expected, which was the 5th straight increase, bringing rates to the highest level since 2009. The European Central Bank announced its plan to end QE and indicated it would begin raising rates in July while initiating a program to avoid fragmentation across eurozone government bond markets. President Lagarde suggested a larger hike would be appropriate in September, if inflation pressures persist
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Advance-Australian-Fixed-Interest-Multi-Blend-Fund-factsheet-15.pdfMay, 2022
The Advance International Fixed Interest Fund underperformed the benchmark during the month of May. Relative manager performance was mixed over the month with Wellington and WAM adding to positive excess returns whilst Standish and PIMCO detracted at the margin.
Western and Wellington both positioned correctly from duration and currency perspectives. Also contributing to relative returns were the managers’ underweight to European core duration. Standish underperformed the benchmark, with the most material drag being an overweight to Australian duration versus that of the US as the spread between the two markets moved steadily wider. PIMCO also delivered negative excess returns, with the detractor being overweight securitized credit, particularly in non-agency RMBS where spreads widened.
Mounting economic growth concerns, a challenging inflation environment, and coordinated policy tightening drove varied results within fixed income sectors. Global government bond yields traded in a wide range. Record inflation levels across most global developed markets (DM), deteriorating economic activity indicators, and fears of central banks overtightening have shifted expectations, particularly in the US, toward the prospect of weaker global growth.
Recent hawkish central bank rhetoric has helped to calm inflation expectations, with breakeven rates across the US, Europe and the UK declining from recent highs. However, markets continued to weigh the trade-off between central bank policy tightening versus the resultant impact on global growth. Most global sovereign yields rose, as markets further priced in expectations for more aggressive policy tightening by major central banks following record high inflation prints – particularly in Europe. At its policy meeting the Bank of England (BoE) hiked the Bank Rate for the fourth consecutive meeting by 25 bps to 1%, while in Europe commentary from several European Central Bank (ECB) committee members indicated support for accelerated monetary policy tightening.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Advance-International-Fixed-Interest-Multi-Blend-Fund-factsheet-7.pdfApril, 2022
The Advance International Fixed Interest Multi-blend Fund marginally underperformed the benchmark during the month of April. Relative manager performance was mixed over the month with Wellington and Standish adding to positive excess returns, whilst WAM and PIMCO detracted at the margin.
Wellington and Standish, both of which had positioned correctly from a duration standpoint, and from a country relative perspective, added to positive excess returns. Contributing to relative returns were also the manager’s underweight to credit risk which aided the portfolio given credit spreads were broadly wider.
Western and PIMCO marginally underperformed the benchmark with positioning in country allocation strategies not working in the manager’s favour (for example, local emerging market bond allocations, including to those in Mexico and South Africa, detracted as yields moved higher along with those in developed markets, and long overweight exposure to Danish and Swiss duration which detracted as yield rose). The economic outlook remains extremely uncertain following Russia’s invasion of Ukraine. While supply-side disruptions keep energy, commodity and food prices elevated, the growth implications are clearly negative. The International Monetary Fund (IMF), for example, now expects global growth to be 3.6% this year, down from 4.4% projected in January. Further downside risks to growth stem from China’s commitment to its zero-Covid policy, which has seen strict mobility restrictions imposed in several regions, including Shanghai. The combination of higher inflation and the prospect of slower growth poses a significant challenge to policymakers
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Advance-International-Fixed-Interest-Multi-Blend-Fund-factsheet-6.pdfFebruary, 2022
The Fund underperformed the benchmark during the month of February. Relative manager performance was mixed over the month with WAM, PIMCO and Standish all detracting whilst Wellington delivered positive excess returns. WAM was the biggest detractor in the portfolio with negative contributions stemming from country allocation strategies, sector allocation (namely EM exposure) and currency positions.
PIMCO also delivered negative excess returns with the largest detractors being its overweight Danish duration position as yields rose. Wellington delivered positive excess returns as its quantitative trend strategies maintained a short duration bias in major economies (US, Europe). This contributed as global sovereign yields rose during the month, driven by prospects of more aggressive central bank tightening amid higher inflation prints. As the European geopolitical crisis continued to unfold, and as economic uncertainty escalated with Russia launching a full-scale invasion of Ukraine, most fixed income sectors underperformed amid broad credit-spread widening combined with sovereign yield increases spurred by major central banks’ policy tightening.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Advance-International-Fixed-Interest-Multi-Blend-Fund-factsheet-5.pdfJanuary, 2022
The Advance International Fixed Interest Multi Blend Fund outperformed the benchmark during the month of January. Relative manager performance was universally positive over the month, driven predominantly by a short outright duration bias across major economies, particularly in the US. As sovereign yields mostly rose across developed markets and as markets became less concerned over the Omicron variant, all our managers outperformed from a rates perspective, reversing the negative impact over Q4 2021. Added to a marginally flat spread environment and a neutral outcome from a currency perspective (where the USD strengthen relative to most currencies), all our underlying strategies faired positively during the month of January. A hawkish tilt in major central banks’ rhetoric, mixed global macroeconomic data underscored by persistent inflation, and geopolitical uncertainty surrounding the Russia-NATO conflict marked a volatile start of year. Most fixed income sectors uncharacteristically underperformed in conjunction with the increase in sovereign yields.
Global government bond yields traded over a wide range during January, ending the month higher. Markets continued to adjust to the potential for earlier, faster monetary policy tightening by major developed market (DM) central banks while omicron-variant related growth fears subsided. At the Federal Reserve’s (Fed) first policy meeting of the year, the central bank gave the clearest hint that an interest hike was highly likely in March. In his press conference following the meeting, Fed Chair Powell stated that the Federal Open Market Committee “is of a mind to raise the federal funds rate at the March meeting, assuming that conditions are appropriate for doing so.” These conditions, which include a tight labour market and increasingly entrenched inflation, would appear to be met. The market continues to price in as many as four hikes in 2022.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Advance-International-Fixed-Interest-Multi-Blend-Fund-factsheet-4.pdfDecember, 2021
The Advance International Fixed Interest Multi Blend Fund outperformed the benchmark during the month of December. Manager performance was universally positive over the month, driven predominantly by a short outright duration bias across major economies, particularly in the US. As sovereign yields mostly rose across developed markets, and as markets became less concerned over the Omicron variant, all our managers outperformed from a rates perspective, reversing the negative impact over November 2021. Added to a marginally tighter spread environment and a positive outcome from a currency perspective (where the USD weakened relative to most currencies), all our underlying strategies faired positively during the month of December.
Notwithstanding some intra-month volatility, global developed market government bond yields ended the month higher. Markets were buoyed by reports showing considerably lower hospitalization and death rates associated with the new Covid Omicron variant despite some initial jitters earlier in the month. Central banks further progressed on their paths toward policy normalization during the period as inflation broadened out across more goods and services. The US Federal Reserve (Fed) accelerated the timeline for tapering its large-scale asset purchase program and projected three rate hikes in both 2022 and 2023.The Bank of England (BOE) hiked rates for the first time since the onset of the pandemic, citing persistent price pressures. While it expects to keep its policyrate on hold through the end of 2022, the European Central Bank (ECB) announced it would conclude its purchases under its pandemic emergency purchase program by March. The Norges Bank once again lifted its policy rate and indicated more hikes were likely, depending on the evolution of the pandemic. The Swiss National Bank and Bank of Japan diverged from many of their peers, maintaining policy rates of -0.75% and -0.1%, respectively. Against this backdrop, global sovereign yield curves flattened driven by increasing short-term yields following a hawkish pivot by major developed market central banks. Policymakers announced plans to dial back monetary stimulus as inflation concerns persisted into Q4. Omicron concerns did not delay monetary policy tightening plans, as most central banks remained focused on upside inflation risks. Within Emerging Markets (EM), select central banks in Latin America and Central and Eastern Europe, Middle East, and Africa continued to hike rates. However, the People’s Bank of China eased policy, cutting the reserve ratio and the policy rate as weak growth persisted, driven by regulatory clampdown on sectors like real estate and technology
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Advance-Australian-Fixed-Interest-Multi-Blend-Fund-factsheet-7.pdfNovember, 2021
The Advance International Fixed Interest Multi Blend Fund underperformed the benchmark during the month of November. Manager performance was universally negative over the month, driven predominantly by a short outright duration bias across major economies, particularly in the US. As sovereign yields mostly fell across developed markets, a move accelerated by the discovery of Omicron towards the end of the month, all our managers underperformed from a rates perspective. Added to a marginally wider spread environment, our underlying strategies fared poorly during November. Fixed income spread sectors underperformed government bonds amid renewed market uncertainty. Sovereign bond yields declined in unison, and credit spreads widened as the detection of the COVID-19 variant Omicron added new concerns to the increasing inflationary strain.
US economic data released was largely positive. Non-farm payrolls posted gains, the unemployment rate dropped, and weekly jobless claims edged down steadily. Eurozone’s composite PMI rose on improved service sector activity. In the UK, manufacturing PMI improved, while near-decade high energy prices stoked inflation. Robust export demand in China lifted industrial production. Japan’s Q3 GDP contracted as supply disruptions and weak consumption weighed on growth. Canada’s unemployment rate fell, though the number of jobs added was below estimates. In Australia, labour force participation recovered but unemployment rose
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Advance-International-Fixed-Interest-Multi-Blend-Fund-factsheet-3.pdfSeptember, 2021
The Advance International Fixed Interest Multi Blend Fund returned -0.95% over the month of September, outperforming the Bloomberg Barclays Global Aggregate Bond Index which returned -0.97%. Manager September performance was broadly positive with most underlying managers outperforming relative to the benchmark.
Western Asset Management was the only manager that marginally underperformed. The strategy benefited from an active underweight duration coupled with a curve flattener position. However, currency positions detracted during the month as risk aversion and the prospect of a less accommodative Fed drove the US dollar broadly stronger.
With respect to the other underlying managers, all managers also benefitted from an overall underweight duration position versus the benchmark. Coupled with positive contribution from excess carry from the credit portfolios most of our underlying managers delivered above benchmark returns. The fragile risk appetite that persisted throughout July and August continued during September as energy price concerns, supply chain issues and regulatory headwinds in China all weighed negatively on investor sentiment.
In the US, commentary from the September Fed meeting was consistent with investor expectations that the Fed will make an announcement regarding the tapering of asset purchases in November. The Fed, however, remains split on whether to raise interest rates next year, although a growing number of participants are moving towards a hawkish bias. At month-end a looming government shutdown was averted, as President Biden signed a last-minute bill to extend funding through December 3, 2021. However, a resolution still must be made on the current U.S. government debt ceiling, with a U.S. default possible as early as October 18th if the issue isn’t addressed
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Advance-International-Fixed-Interest-Multi-Blend-Fund-factsheet-2.pdfAugust, 2021
The Advance International Fixed Interest Multi Blend Fund outperformed the benchmark during the month. Manager performance was positive, with all underlying managers outperforming relative to the benchmark.
Western Asset Management was the strongest performing manager. The strategy benefitted from an active underweight duration coupled with a curve flattener position. In addition, the fund’s allocation to hard currency emerging market and high yield credit allocations added to returns, as riskier assets were supported by the prospect of a patient Fed outlook.All managers also benefited from an overall underweight duration position versus the benchmark. Coupled with positive contribution from credit spreads,most of our underlying managers delivered above benchmark returns. The fragile risk appetite continued from July into August as softer economic data in the US and China, regulatory head¬winds in China and geopolitical tensions in Afghanistan all weighed negatively on investor sentiment.Fixed income sectors posted mixed results versus government bonds as sovereign yields drifted higher. Fading vaccine efficacy amid new COVID-19restrictions and the lurking Delta variant reinforced global growth concerns. US economic data remained steady though consumer sentiment remainschallenged fuelled by concerns over rising COVID-19 Delta variant cases.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Advance-International-Fixed-Interest-Multi-Blend-Fund-factsheet-1-1.pdfJuly, 2021
The Advance International Fixed Interest Multi Blend Fund underperformed the benchmark during the month of July. Manager performance was modestly negative over the month as the portfolio was marginally down versus the benchmark.
Compositionally, security selection and asset allocation were the largest drag on relative performance with rates positioning modestly detracting and currencies flat on the month. Hard currency emerging market bond exposures was a sector to call out as the asset class underperformed due to an increase in infections across several countries with low vaccination rates and market reassessment of the global growth outlook. Investment grade and high yield credit allocations also detracted.
Global government bond yields fell during July, as fears over the COVID-19 Delta variant continued to weigh on investor sentiment. Signs of weakness in US and Chinese data also dampened global growth optimism. Most fixed income sectors underperformed treasuries as interest rates rallied and credit spreads widened.European government bonds rallied strongly following the outcome of the ECB’s strategic review, which saw it adopt a symmetric 2% medium-terminflation target, an increase from the previous target of “below, but close to, 2%”. At its subsequent policy-setting meeting, the ECB strengthened itsforward guidance not to raise rates until it sees inflation at 2% “well ahead of the end of its projection horizon”
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Advance-International-Fixed-Interest-Multi-Blend-Fund-factsheet-1.pdfMarch, 2021
The Federal Reserve (Fed) left its policy settings unchanged at its March meeting. The summary of economic projections reflected a more positive outlook on the state of the US economy with economic growth forecast now to increase by 6.5% (from 4.2% previously) in 2021. The unemployment rate is now forecast to be 4.5% (from 5%) and core PCE inflation is expected to rise 2.2% in 2021 (previously 1.8%). The longer-term inflation forecast remains benign with rises of 2% and 2.1% forecast for 2022 and 2023.
In the following press conference Fed Chair Powell reiterated that the criteria for raising rates includes maximum employment, 2% inflation along with an expected inflationary trajectory to exceed 2% for some time. Transitory factors that see an increase in the inflation rate will be looked through. Late in the month, the Fed also announced that the Supplementary Leverage Ratio exemption would expire at the end of March, putting upward pressure on US treasury yields
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Advance-Australian-Fixed-Interest-Multi-Blend-Fund-factsheet-2.pdfNovember, 2020
The Advance International Fixed Interest Multi Blend Fund strongly outperformed the benchmark during the month of November. Manager performance was broadly positive with all the underlying managers outperforming the benchmark. Standish, WAM and PIMCO all delivered strong relative performance during the month, aided by its overweight to a number of spread sectors, in particular the investment grade corporate market, and peripheral European government bonds. Wellington was the only manager that detracted relative to the benchmark.
The fund has maintained a relatively conservative stance since the breakout of COVID 19 in March. Consequently, with risk assets rallying strongly, the fund has underperformed over this environment. Developed fixed income markets had a positive month in November. The Federal Reserve (the Fed) reiterated its forward guidance from September, stating that the fed funds rate will be held at 0.-0.25% until the economy is back to maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time, reflecting their move to average inflation targeting. Expectations also remained high for the European Central Bank (ECB) to expand its asset purchase program at its December meeting and as a consequence, spreads between peripheral European government bond yields and those on German bunds narrowed. US Treasury (UST) bond yields fell and the yield curve flattened on the news that the Republicans remained in control of the Senate, however, as this will likely act as a barrier to Biden’s fiscal spending and borrowing plans.
In Europe, Italian government bonds (BTP) versus German bund spreads continued to compress. Peripheral European sovereigns continued to be largely supported by European Central Bank’s quantitative easing, regardless of COVID-19 developments. Despite persistently-high case numbers across Europe and the US, markets were buoyed following a series of impressive COVID-19 vaccine breakthroughs. The global risk sentiment improved dramatically during consequently, as significant developments were made on a COVID-19 vaccine and political uncertainty abated following the US presidential election.
Spread sectors benefitted from the strong risk appetite and outperformed across the board. Most fixed income spread sectors tightened, as US presidential elections concluded, and major central banks’ policies aimed to mitigate risk. Inflation expectations rose over the month as oil prices rebounded as a result of renewed global demand following the positive vaccine headlines. The US dollar and Japanese yen weakened on an improvement to the global growth outlook. Against that backdrop, the Bloomberg Barclays Global Aggregate Bond Index returned flat (0.53%) over the month, bringing the one year performance to 4.52%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Advance-International-Fixed-Interest-Multi-Blend-Fund-factsheet.pdfticker: ADV0067AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
https://www.multimanager.mercer.com.au/fund-facts/single-sector-funds.html
manager_contact_details: Array
asset_class: Fixed Income
asset_category: Bonds - Global
peer_benchmark: Fixed Income - Bonds - Global Index
broad_market_index: Global Aggregate Hdg Index
structure: Managed Fund
fund_features:
Advance International Fixed Interest Multi-blend Wholesale aims provide a source of income from international fixed interest exposure with a total investment return (before fees and taxes) that outperforms the benchmark over periods of three years or longer. The Fund invests in a wide range of fixed interest securities and investments, such as government, corporate and typically other international fixed interest securities.
- Manager Address : Tower Two International Towers Sydney Mercantile Walk 200 Barangaroo Avenue Barangaroo NSW 2000
- Phone : 1800 819 935
- Website : http://www.advance.com.au/default.asp
- Contact Email : investorservices@advance.com.au