September, 2020
For the quarter ending September, the CC JCB Active Bond Fund - Class A units (the Fund) returned 1.00% (after fees), outperforming the Bloomberg AusBond Treasury (0+Yr) Index by 0.22%.
The Australian rates market started the month on the defensive with compelling valuations. This was following the release of the Fed’s new policy framework which triggered momentum style positioning to unwind flows through global rates in the last week of August. The weakness was short-lived, marking the low of the month. More dovish messaging emerged from the RBA on September 1 as they reinforced their desire to remain “highly accommodative as long as is required”. A weaker than expected Q2 GDP of -6.3% and the lockdown status of Victoria underscored the bearish economic sentiment.
JCB adjusted the Fund’s yield curve positioning through the month in anticipation of longer end supply. JCB remain confident that the RBA will continue anchoring front-end yields and supporting the ACGB and semi-government bond market. The belly of the curve remains very compelling. The Fund participated in the $25 billion 2026 Australian Government Bond syndication, although the pricing was revised tighter following the RBA’s oracle Bill Evans call for a rate cut in October on the day of the pricing, which triggered an ill-timed short squeeze.
JCB still believes the bullish secular forces underpinning the global bond markets will remain as a second wave of Covid-19 intensifies in the Northern Hemisphere. JCB anticipate the RBA to support the government’s effort to stimulate the economy by lowering the cash rate further and participating in their buyback program with the need to move further out the curve. JCB remain mindful of the myriad of potential event risks that remain on the calendar going forward. US fiscal stimulus talks and the progress of US presidential election could change the direction of the rates market quickly and forcefully, which will provide the Fund tactical opportunities to harvest alpha.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/158721972.pdfticker: CHN0005AU
commentary_block: Array
factsheet_url:
https://documentscdn.financialexpress.net/Literature/61172A27E84E683A60E8829FCD5C7E7C/158721972.pdf
https://investmentcentre.moneymanagement.com.au/factsheets/mi/nctz/cc-jcb-active-bond
asset_class: Fixed Income
asset_category: Bonds - Australia
peer_benchmark: Fixed Income - Bonds - Australia Index
broad_market_index: Australian Bond Composite 0-10Y Index
structure: Managed Fund