September, 2023
The portfolio’s overall interest rate positioning delivered negative relative performance over September as global bond markets sold-off.
Our overweight positioning in Australia, New Zealand and US detracted from relative performance as yields rose in the respective markets over the month. Against this, our US 5/30-year steepener position made a positive contribution to relative performance, as did the short Japan 10-year positioning. As European sovereign spreads drifted wider over the course of the month, we also moved to neutralize our underweight position in the European periphery.
Within credit markets, our overweight position in the AUD corporate sector contributed to relative performance over September as spreads tightened.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_diversified_fixed_income-2-1.pdfAugust, 2023
The portfolio’s overall interest rate positioning delivered positive relative performance over August. Our overweight positioning in Australia and New Zealand contributed to relative performance as yields fell across the curve in Australia and also declined in New Zealand. Our US curve steepener was also positive for relative performance, as 30-year US Treasury yields rose by more than 5-year yields, while our short Japan 10-year positioning was flat over the month.
Within credit markets, our overweight position in the AUD corporate sector contributed to relative performance over August as spreads tightened.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_diversified_fixed_income-1-1.pdfJuly, 2023
The portfolio’s interest rate positioning delivered positive relative performance over July. Our short duration position in Japanese 10-year futures was positive as the Bank of Japan introduced much greater flexibility in its yield curve control program, effectively raising the upper limit of the 10-year JGB yield target from 0.5% to 1.0%. Futures prices declined as bond yields rose, benefiting the portfolio. Our US curve steepener was also positive for relative performance, as 30-year US Treasury yields rose by more than 5-year yields. Elsewhere, we also increased our long positioning in New Zealand 2-year rates, as the RBNZ held the official cash rate steady at 5.50% and signaled that its tightening cycle was likely finished.
Within credit markets, our overweight position in the AUD corporate sector contributed to relative performance over July as spreads tightened.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_diversified_fixed_income-7.pdfJune, 2023
The portfolio’s overall duration positioning delivered negative relative performance over June, as global bond markets sold-off. Within duration management, our long positions in Australia, New Zealand and the US detracted, while the short position in Canada contributed. The short position in Japan was flat for the month, as the Bank of Japan’s policy continues to diverge from those of other developed markets.
Our yield curve positioning was mixed for the month, with front-end flatteners in Australia contributing and curve steepeners in the US detracting. Within credit markets, our overweight position in the AUD corporate sector contributed to relative performance over June as spreads tightened.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_diversified_fixed_income-6.pdfMay, 2023
The portfolio’s overall duration positioning delivered negative relative performance over May, as global bond markets soldoff. Within duration management, our long positions in Australia, New Zealand and the US detracted, while the short position in Canada contributed. The short position in Japan was flat for the month, as the Bank of Japan’s policy continues to diverge from those of other developed markets.
Our yield curve positioning was positive for the month, with front-end flatteners in Australia contributing and curve steepeners in the US remaining steady. Within credit markets, our overweight position in the AUD corporate sector contributed to relative performance over May as spreads tightened, whereas other developed market spreads widened over the month and detracted from performance outcomes.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_diversified_fixed_income-5.pdfApril, 2023
The portfolio’s overall duration positioning delivered mixed relative performance over April. Within duration management, our long position in Australia was a small detractor as yields rose modestly, while our long position in New Zealand was a contributor as yields fell.
Our short position in Japan detracted from relative performance as the BoJ maintained its ultra-loose monetary policy in its latest meeting. In contrast, our US 5/30-year steepener position contributed positively over the month and we increased our position mid-month. Over the course of the month, we initiated a long position in European core against a short position in European periphery
On credit, our overweight position in the AUD corporate sector benefited largely from the extra yields (“carry”) as credit spreads tightened modestly over the month.
File:February, 2023
The portfolio’s overall duration positioning delivered negative relative performance over the month. Within duration management, our long positions in Australia, New Zealand and the US detracted from relative performance as yields rose, while the short position in Japan was flat to relative performance. During the month, we adjusted our duration positioning in Australia from a neutral to long, in Canada from a short back to neutral, and topped up risk in the Japan short position.
On credit, our overweight position in the AUD corporate sector was a contributor over January as credit spreads tightened, while underweights in the US contributed as well.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_diversified_fixed_income-4.pdfJanuary, 2023
The portfolio’s overall duration positioning delivered positive relative performance over the month. Within duration management, our long positions in New Zealand and the US contributed to relative performance, as yields declined, while short positions in Canada, Japan and Germany detracted. During the month, we adjusted our duration positioning in Australia from a small short back to neutral. On credit, our overweight position in the AUD corporate sector was a contributor over January as credit spreads tightened, while underweights in the US detracted at the margin.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_diversified_fixed_income-3.pdfDecember, 2022
The Australian sovereign yield curve sold-off over December in-line with offshore bond markets largely due to the Bank of Japan’s adjustment of its YCC program and concerns over inflationary pressure as China ditched its Zero-Covid measures. Australian 3-year Government bond yields rose 34bps, ending the month at 3.50% while the 10-year Government bond yield increased by 52bps, to end the month at 4.05%. The spread of Australian 10-year Government bond yield against US 10-year Government bond yields – which was inverted at the end of November - turned positive, ending the month at +17bps. Credit spreads tightened over the month (Bloomberg AusBond Credit 0+ year index tightened from 156bps to 149bps). The Bloomberg AusBond Composite 0+ year returned -2.06% in December.
The portfolio’s overall duration positioning delivered positive relative performance over the month. Within duration management, our short position in Australia, Canada and Germany contributed positively to performance, while our long position in New Zealand and US detracted from relative performance. Our short Japan 10-year position was a contributor to relative performance as the Bank of Japan made a historical adjustment to its YCC program widening the target band on the 10-year JGB yield from 0.0% +/-25 bps to +/-50 bps, prompting the 10-year yields to surge. On Credit, our overweight position in the AUD corporate sector was a contributor over December as credit spreads tightened. Credit positioning remained stable over the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_diversified_fixed_income-2.pdfNovember, 2022
The portfolio’s overall duration positioning delivered positive relative performance over the month. Within duration management, our short position in Australia and Canada detracted from relative performance, while our long duration position in New Zealand contributed positively to performance. Our short Japan 10-year position resulted in flat contribution to relative performance as the Bank of Japan maintains its ongoing zero interest rate policy. On credit, our overweight position in the corporate sector was a contributor over November as credit spreads tightened. Credit positioning remained stable over the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_diversified_fixed_income-1.pdfOctober, 2022
Australian sovereign bond yields fell over October as investors remained concerned about the growth outlook. Australian 3- year Government bond yields fell 23bps, ending the month at 3.29% while the 10-year Government bond yield fell 13bps, to end the month at 3.76%. The spread of Australian 10-year Government Bond yields against US 10-year Government bond yields inverted, reaching -29bps from +6bps the month prior, a significant outperformance as US yields continued to rise. Credit spreads widened over the month (Bloomberg AusBond Credit 0+ year index widened from 148bps to 169bps).
The Bloomberg AusBond Composite 0+ year index returned 0.93% in October. In early October, the RBA raised the official cash rate target by 25bps to reach 2.60%, a shift from the previous four 50bps hikes. The RBA is aiming to deliver both lower inflation and a soft landing for growth, with their statement noting that they had increased the cash rate 'substantially in a short period of time'. The Board had slowed the pace of hikes in part to 'assess' their impact on the inflation and growth outlook. Given the tight labour market and the upstream price pressures, the Board will continue to pay close attention to both the evolution of labour costs and the price-setting behaviour of firms in the period ahead. Looking forward, the Board commented that ‘further increases are likely to be required over the period ahead’.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_diversified_fixed_income.pdfSeptember, 2022
The portfolio’s overall duration positioning delivered mixed performance over the month. Within duration management, our overweight in Australia and New Zealand detracted from performance, while our underweight duration positions in the US and Germany contributed positively to performance.
Over September, we took some profit on our short US and German Schatz positions as yields rose in these markets. On credit, our overweight position in the corporate sector was a detractor over September as credit spreads widened. Credit positioning remained stable over the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/192337837.pdfAugust, 2022
The portfolio’s overall short duration positioning contributed positively to relative performance as government bonds across most markets sold off in August. Within duration management, our underweight duration in the US, UK, Japan and Germany contributed positively to the fund’s relative performance, while our overweight duration positions in Australia and New Zealand was a detractor.
Over August, we took some profit on our short Japan and Europe (core) duration positions. On credit, our overweight position in corporate credits was a contributor over August as spreads moved to our advantage. We also added to our credit positioning in US and Australia over August mainly through derivatives.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/190847619.pdfJuly, 2022
The Australian sovereign yield curve flattened over July, in line with sentiment seen offshore. Australian Government bonds traded sideways early in the month before staging a strong rally in the last week of July. Australian 10-year Government bond rallied around 50bps in the last week to end the month at 3.06%. The spread against US 10-year Government bond yields tightened to 41bps (from +65bps at the end of prior month). The Bloomberg AusBond Composite 0+ year index returned +3.36% in July driven by both fall in bond yields and credit spreads tightening (Bloomberg AusBond Credit 0+ year index tightened from 147bps to 139bps), recovering some of the losses from the previous months.
In early July, the RBA raised both cash rate target and interest rate on Exchange Settlement balances by 50bps as widely anticipated by market participants after series of inflation prints. Inflation is forecasted by the bank to peak later this year. Rates were largely unchanged and muted in reaction to the hike.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/189860022.pdfMay, 2022
Fixed income sectors generated mixed performance in May with US bond markets generally outperforming their European counterparts. US corporate bonds were amongst the strongest performers, buoyed by falling US Treasury yields and narrowing credit spreads. On the other hand, European investment grade and high yield bonds both generated negative returns (in USD terms) driven primarily by widening spreads. Elsewhere, locally denominated Emerging Market bonds posted solid positive returns with gains in both local rates and EMFX. The yield on 10-year Treasuries fell from 2.93% to 2.84% and the 2-year equivalent declined from 2.71% to 2.56%.
In the US, recession fears dominated much of the month. Retail sales and housing activity showed signs of cooling. But the month ended on a positive note. Data pointed to a 0.9% rise in consumer spending for April, versus forecasts for 0.7%, while figures for March were also revised higher. News on inflation was also encouraging, with the Federal Reserve’s favourite gauge - the personal consumption expenditures (PCE) index rising just 0.2% month-on-month in April. The release of the minutes of the Fed’s last meeting contained hints that policymakers may be willing to slow or pause rate hikes later in the year. The minutes showed that “many participants” judged that front-loading rate hikes “would leave the committee well positioned later this year to assess the effects of policy firming.”
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/188132494.pdfApril, 2022
Credit sectors took another leg down in April with US high grade and EM hard currency sovereign bonds amongst the worst performers as yields moved higher and credit spreads widened. 10-year US Treasury yields climbed 59bps to 2.93% in April, having reached an intra-month high of 2.98%. The US dollar outperformed all other G10 currencies driven by market expectations of faster and further rate hikes by the US Fed relative to other developed countries.
In the US, consumer price inflation reached a 40-year high of 8.5% in March, with signs of price pressures broadening. Fed Chair Jerome Powell described the US jobs markets as “unsustainably hot” and said “there's something in the idea of front-loading” rate hikes. Nonfarm payrolls grew by 431,000 in March, and the unemployment rate fell to a near 50-year low of 3.6%. The US economy contracted at a 1.4% annualized pace in 1Q22, far below consensus estimates of +1.0%. The decline was driven mainly by net exports, which subtracted 3.2 percentage points from GDP growth. Consumption and business investment, the main drivers of the economic cycle, both showed solid gains
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/187296413.pdfMarch, 2022
Yields rose in March, especially at the front end of the curve, as investors positioned for a faster pace of central bank policy tightening in response to elevated inflation. 10-year US Treasury yields climbed 51bps to 2.34%. The 2-year/10-year portion of the curve inverted briefly for the first time since August 2019. In Europe, yields on 10-year German Bunds climbed 39bps to 0.55%. Most major fixed income sectors generated negative returns driven by higher yields despite tighter credit spreads during the month.
In the US, the focus in March was on Federal Reserve policy, with a first rate hike since 2018 and top officials pointing to a faster pace of tightening ahead. The median forecast from members of the Federal Open Market Committee was for seven rate hikes this year, implying an increase at each of the remaining meetings. Federal Reserve Chair Jerome Powell said the central bank would not shy away from raising rates to restrictive levels if needed to control inflation. That hawkish commentary prompted markets to adjust rate hike expectations for the remainder of 2022 up to around eight 25bps increases, implying a Fed Funds rate of roughly 2.4% by year-end. Expectations of faster policy tightening came as consumer price inflation hit a 40-year high of 7.9% year-overyear in February, while even core inflation—excluding volatile food and energy prices—rose to 6.4%
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/186398153.pdfFebruary, 2022
Global equities and fixed income markets fell for a second straight month in February, as the outset of war between the Russia and Ukraine added to worries about the outlook for growth, inflation, and central bank policy. Markets experienced heightened volatility, especially toward the end of the month as investors weighed the impact of Russia’s invasion of Ukraine, potential disruptions to the flow of commodities, and the ramping up of global sanctions on Russia. The conflict has escalated rapidly. Stricter sanctions have been announced by many countries, including measures to cut off select Russian financial institutions from the SWIFT global payments system. Sanctions and punitive measures so far have allowed, generally, for a continued flow of commodities from Russia to global markets, though the conflict has affected some oil pipelines and supplies of wheat.
Uncertainty about the flow of commodities comes at a time when global consumers are already facing inflation at multidecade highs, and signs that price pressures are broadening. US CPI hit 7.5% year-over-year in January, a 40-year high; Eurozone consumer prices rose by a record 5.1%; and UK CPI was 5.5%, a three-decade high. With inflation still elevated, central banks have continued to signal a shift toward tighter policy. Public comments from FOMC members continue to suggest that the US Federal Reserve will start raising rates at their next meeting on March 16th, with balance sheet reduction likely to begin a bit later in the year. The Bank of England raised interest rates again in February, to 0.5%, while the European Central Bank kept rates on hold but said inflation risks were tilted to the upside
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/185606563.pdfJanuary, 2022
Virtually all major fixed income sectors generated negative returns in January. Developed market bonds in Europe and the US suffered from rising yields but generally outperformed corporate bonds and other spread sectors that were impacted by a combination of rising yields and widening spreads. EM local currency bonds were one of the best performing asset classes buoyed by gains in EM FX that largely offset losses in local rates. China Fixed Income posted a solid gain for the month as rates rallied and the currency held its own against the dollar. The US 10-year yield moved up around 27 basis points to 1.78% at the end of the month while the 2-year yield, which is more sensitive to Fed policy expectations, rose even more, up around 45 basis points to end the month at 1.18%.
In the US, the news agenda for investors was dominated by the more hawkish shift in Federal Reserve rhetoric, with Jerome Powell saying the “economy no longer needs sustained high levels of monetary policy support” and refusing to rule out a faster pace of rate rises or moving in larger increments. On the data side, US economy grew by 6.9% in the fourth quarter of 2021 on an annualized basis, ahead of a consensus forecast for 5.5%. For the full year 2021, the US economy grew 5.7%, the fastest pace since 1984. However, other economic data was mixed with inflation remaining high. The ISM PMIs fell, although they are still at levels consistent with strong growth. Nonfarm payrolls increased by only 199,000, far below consensus expectations, but the unemployment rate fell to a postpandemic low of 3.9% due to the millions of Americans that have left the labour force since pre-pandemic. CPI rose 7% year-on-year in December, the highest inflation rate since 1982 although there are some preliminary signs that the peak may be near.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/184034430.pdfDecember, 2021
US government bond yields gradually rose throughout December, as volatility surrounding the omicron variant subsided and the market began focusing on the implications of the Fed's upsized tapering and the potential for swifter policy tightening. Credit spreads tightened in December, with high yield spreads tightening more than investment grade and retracing the omicron-induced widening from the previous month. Total returns were generally positive in the highbeta segments and negative in higher quality, rate sensitive segments of the fixed income market as rates rose during the month.
In the US, Congress was able to pass a bill that keeps the government funded for another few months and struck a deal to raise the debt ceiling. But the Build Back Better legislation - President Joe Biden's USD 1.75 trillion investment package in social and climate programs - suffered a setback after a key Democratic senator withdrew his support. On the economic front, inflation and supply chain issues remained in the spotlight as headline consumer price index rose 6.8% in November, its biggest annual increase since 1982. The Fed took a more hawkish turn at its December meeting, announcing an accelerated tapering of bond purchases at a pace of USD 30bn per month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/182706826.pdfNovember, 2021
Credit spreads widened during the month of November, with high-beta segments most affected by worries over rising inflation and later the impact of the omicron variant. It was a month of two parts for longer-term US government bond yields. For much of the month, yields trended higher amid concern over the potential for swifter policy tightening from the Federal Reserve. This contributed to a rise in 10-year Treasury yields from 1.56% at the start of November to around 1.68% by 24th November. But the mood shifted abruptly with growing concern over the omicron variant, sending the 10-year yield down to 1.46% by the end of the month. In the US, COVID-19 case counts trended higher in November, although conditions vary across the country. Despite this, there was some improvement in mobility indicators. Economic data for October was generally strong, with nonfarm payrolls rising by a better-thanexpected 531,000, coupled with upward revisions to previous months' data. The unemployment rate fell to a post-pandemic low of 4.6%. The 6.2% inflation rate in October was the highest since a brief period in 1990, and excluding this period, inflation has not been this high since 1982. The Fed begun tapering its QE asset purchases under a plan that would end the program by mid-2022.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/181856712.pdfSeptember, 2021
Developed market high-beta segments outperformed their lower beta counterparts during the month of September. However, total returns were negative given headwinds from the move higher in rates in both the US and Europe. The only credit segments showing a positive return were US and European senior loans, which are insulated from higher rates. EM Sovereign bonds in USD dollar fell during the month, reflecting their longer duration as well as developments in China’s property sector and one of its most indebted companies, Evergrande.
US rates sold off during the month, with the 10-year yield up 18 bps to 1.48% driven by a more hawkish than expected tone from the FOMC meeting on September 21-22. The Fed indicated that it was on track to start tapering its quantitative easing asset purchases, currently running at USD 120bn a month, soon. In his post-meeting press conference, Chair Powell confirmed that the tapering announcement could be made as soon as the next meeting. Treasury Secretary Janet Yellen said that the debt ceiling must be raised by 18 October for the government to continue paying its bills. The House voted to suspend the ceiling, but Republicans in the Senate used the filibuster to prevent a vote, insisting that Democrats add a debt ceiling increase to their budget reconciliation bill. Job growth exceeded 1 million in July but slowed sharply in August to just 235,000. At the same time, job openings soared to record highs as businesses struggled to find workers.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/179975856.pdfAugust, 2021
Developed market government bond yields rose during the month of August. The 10-year US Treasury ended the month close to 1.3%, up modestly from around 1.22% at the start of the month. The yield on 10-year German Bunds ended the month at –40bps. Consequently, duration-sensitive sectors such as US and European IG generated negative returns. Spreads tightened in higher beta sectors such as US and European HY leading to positive total returns for the month. EMD hard currency bonds posted a positive monthly return driven by spread tightening despite rising US Treasury yields. US economic data released in August indicated robust growth and continued inflationary pressure as the supply side struggled to keep up with demand. Nonfarm payrolls increased by 943,000 in July, the most since August 2020. The ISM Services Index hit a record high as consumers shifted their spending toward services. Core CPI rose by 0.3% month-on-month, the smallest increase since February. However, the spread of the delta variant caused new COVID19 cases to rise in August, with record high infections and hospitalizations in some areas. In his speech at the Jackson Hole symposium, Fed Chair Powell said that he expects the Fed to begin tapering its USD 120bn per month asset purchases by the end of the year, though he emphasized that tapering and rate hikes are two separate decisions.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/179317195.pdfJuly, 2021
The 10-year US Treasury rallied in July, with yields falling from 1.47% to finish the month at 1.23% and the curve flattened. European rates followed a similar pattern, with the 10-year yield on German Bunds decreasing by 25bps to end the month at -0.46%. Global bond market returns were broadly positive, driven by spread tightening in most credit markets and falling US Treasury yields. US and EUR HY eked out small gains in July. EM Sovereign bonds were also slightly up for the month, however spreads on Asia HY widened by 106bps due to ongoing negative news flow around the Chinese property developer Evergrande.
In the US, second quarter annualised GDP growth of 6.5% fell short of an 8.5% forecast, with the difference mainly due greater-than-anticipated pandemic-related disruptions and inventory drawdowns. Leaving this aside, consumer spending was strong with growth accelerating to 11.8% annualised, from 11.4% in the first quarter. Forward-looking indicators were also positive, with the ISM manufacturing and services survey readings both above 60 for June, well above the 50 level that separates expansion from contraction. Net job creation for the month was the strongest since last August at 850,000. With an improving economic outlook, the Federal Reserve concluded its July policy meeting by saying for the first time that “the US economy has made progress toward” the Fed’s goal. That marked another step towards a tapering of bond purchases, though the Fed has set a high economic bar for a withdrawal of stimulus.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/176088908.pdfJune, 2021
The yield on the 10-year US Treasury declined 13 basis points from the start of June while the German 10-year Bund yield moved little over the month, with yields falling just 2 basis points to –0.19%. Global bond markets posted a positive return in June due to a combination of falling US Treasury yields and tightening credit spreads. US investment grade and high yield corporates led the way followed by hard currency denominated emerging market bonds while European corporate bonds lagged. Local currency EM bonds also fared poorly dragged down by weaker EM currencies.
The US economy continued to recover in June. With more than half of the population having received at least one dose of the vaccine, new COVID-19 cases are at their lowest levels since the early days of the pandemic, enabling more of the economy to reopen. Economic data for May showed inflationary pressure building as the supply side struggled to keep up with strong demand. Negotiations over the next fiscal package continued to progress with an increased likelihood that a bipartisan deal focused on traditional infrastructure would be enacted. At the FOMC meeting on 16 June, the Fed signaled an earlier start to tapering and rate hikes. A majority of FOMC members now sees rate hikes beginning by 2023, with a significant minority looking for hikes in 2022.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/174870810.pdfApril, 2021
US long-term bond yields fell at the beginning of April and then remained broadly range-bound for the rest of the month. The 10-year US yield finished the month at 1.63%, 11 basis points lower than the peak reached at the end of March. In Europe, the yield on 10-year German bunds rose during the month of April, from -0.29% to -0.20%.
During April, the lower-rated segments of global credit markets continued to perform well. US and EUR HY both generated positive returns driven largely by meaningful spread tightening and declining US Treasury yields. Spreads on US IG intermediate bonds compressed slightly as the asset class eked out a small positive return.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/172297831.pdfNovember, 2020
After fees and expenses, the portfolio increased by 0.11% over the month, underperforming the benchmark by 10bps. November was a strong month for risk assets with global equities and bonds rallying in the wake of the outcome of the US presidential election and positive news on the development of effective COVID-19 vaccines. Within Fixed Income US 10-year Treasury yields declined immediately following the US election results, then moved higher on vaccine optimism.
The Australian bond market underperformed global counterparts given longer-dated Australian government bond yields stepped higher over the month. Australian 3 year government bond yields initially traded lower but this was short-lived as they retraced to close the month back near where they began at 0.11%. Meanwhile 10 year government bond yields closed the month 7bps higher at 0.90%. In the US, 10-year Treasury yields declined immediately following the US election results, in anticipation of potentially lower levels of fiscal stimulus than under a Blue Wave outcome.
Yields subsequently moved higher on vaccine optimism, peaking at 0.97% on the 11th November before finishing the month at 0.84%. In Europe, German 10-year bund yields followed a similar path peaking at -0.49% before moving lower to -0.57%. Our overweight duration positions in Australia and New Zealand detracted from relative performance, as both markets underperformed global peers with the risk-on sentiment subsequent to the US election. Chinese sovereign bonds also underperformed, at the margin, but remain attractive in real terms. Elsewhere, our overweight positions in both Australian and global credit made strong positive contributions to performance, while a short currency position in the NZD detracted from returns before being closed by month-end
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/162702399.pdfticker: SBC0007AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
manager_contact_details: Array
asset_class: Fixed Income
asset_category: Bonds - Global / Australia
peer_benchmark: Fixed Income - Bonds - Global / Australia Index
broad_market_index: Global Aggregate Hdg Index
structure: Managed Fund
fund_features:
UBS Diversified Fixed Income Fund aims to provide investors with access to a diversified market portfolio of Australian and global fixed income assets. Eligible investments of the Fund comprise Australian and international cash and fixed income securities. The Fund may gain its asset sector exposure by investing in UBS managed funds or direct securities and financial derivatives. The fixed income assets of the Fund are predominantly of investment grade quality. Non-investment grade fixed income assets (high yield and emerging market debt) will not exceed 30% of the total portfolio. The Fund may also invest in financial derivatives to gain or reduce exposure to relevant markets and currencies and manage investment risk. The Fund’s strategic foreign currency exposures will not exceed 10% of its total portfolio.
- Manager Address : Chifley Plaza, 2 Chifley Square, Sydney NSW 2000, Australia
- Phone : +61 2 9324 3100
- Website : https://www.ubs.com/au/en.html