Monthly Commentary - Pareto ESG Global Corporate Bond
We have spent the last days of August in the iconic city of New York for meetings with banks and other players in the market. There is still some slowdown in activity due to summer vacation, but overall, there is cautious optimism despite some challenges. The investment banks’ syndicate desks have several companies lined up for new bond issuance after American "Labor Day".
Central bankers and economists gathered in Jackson Hole on August 24-26 for the annual symposium, which has become an increasingly high-profile event. The overall message was, not entirely unexpectedly, a balance between being aggressive against inflation and watching out for a possible slowdown in the global economy. Federal Reserve Jerome Powell concluded with the sentence “the Fed is navigating by the stars under cloudy skies.”
Global high yield spreads ended the month with a marginal increase and so did the US 10-year yield. The yield went from 4% up to a high of 4.35%, ending the month around 4.10%.
Several companies reported for the second quarter in August and most see a slowdown but decreasing inflationary pressure. Well-positioned companies with high “pricing power” manage to maintain margins even in a slightly declining market.
The new issue market had very little activity in Europe and a few new issues in the US.
After a weak start to the month, but a strong finish, August was another month with positive returns for the fund.
The fund did not participate in any new issues during the month.
We traded some in the secondary market where we increased in Wesco and Pentair, while we sold our entire position in Kronos.
Yield levels in fixed income are now more attractive than they have been for a very long time.
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 +378 bp at the end of July to +392 bp at the end of August.
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.