Monthly commentary Pareto ESG Global Corporate Bond
Taylor Swift and a large crowd of "Swifties" will descend on Stockholm 17–19 May for three sold-out shows. Several theories about the influence of superstar concert shows on inflation continue to circulate. Sky-high hotel prices and an estimated economic effect of close to half a billion SEK is astonishing. The truth is probably that the effect is short-term, but the very fact that there is a debate is incredible.
Whether it is Beyoncé, Swifties or a strong global economy that is the reason for continued sticky inflation numbers, the decline in inflation has paused for now. This is especially true in the US, which has created a problem for central banks that indicated in December 2023 that they were ready for interest rate cuts. The market is now pricing in divergent interest rate paths between the US and Europe. Europe is expected to cut in June, while the US is now pricing in perhaps only one rate cut in late 2024.
Credit spreads widened marginally in both the US and Europe. The US 10-year interest rate rose sharply during the month, from 4.3% to 4.6%.
The fund was slightly down this month, in line with global high-yield indices.
The continued strong global economy has contributed to large volumes in the new issue market for corporate bonds, especially in the US. US high-yield gross volume is now $110 billion year-to-date in 2024. Europe saw increasing volume during April.
The fund participated in several new issues and was also active in the secondary market. In terms of new issues, the fund participated in Boels, Techem and Verisure.
In the secondary market, the entire holdings were sold in Liberty Mutual and European Energy, while we scaled down in Darling Ingredients.
The strategy going forward remains having a strong focus on companies that contribute with sustainable solutions here and now.
The fund is classified as an article 9 fund under the SFDR Disclosure Regulation.
The synthetic CDS credit index widened. The iTraxx Crossover index went from +297 bp at the end of March to +315 bp at the end of April.
Portfolio management team
Stefan Ericson
Lead portfolio manager / Branch manager Stockholm
Philip Lindgren
Credit analyst
Ingrid Johanne Nygaard
ESG analyst
Historical returns are no guarantee for future returns. Future returns will depend, inter alia, on, market developments, the portfolio manager’s skill, the fund’s risk profile, as well as fees for subscription, management and redemption. Returns may become negative as a result of negative price developments. This is marketing communication.