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What is a correct and fair valuation? That, of course, is a constant question. At the end of May, the sentiment shifted more towards the view that we have a "fair" and interesting yield now in many parts of the global corporate bond market.

The financial pain we have felt since the beginning of the year has several causes, of course. However, the enormous capital growth we have seen in the last 10 years can probably to some extent be attributed to 10 years of QE (quantitative easing). For the past two years, these measures have been on steroids. Inflation figures have also this month shown persistent and continued high inflation. The Federal Reserve, which is the more aggressive central bank, raised interest rates by 50 basis points in early May. The negative risk sentiment continued in the first part of May, which contributed to both falling equity markets and credit spreads increasing until mid-May.

During the last two weeks of May, the entire market stabilised. In the shadow of the horrors of war, the global economy has also been greatly negatively affected by the severe shutdowns in China. With news of restrictions starting to be lifted in China, those were also positive signals.

There has been a flurry of company reports for Q1 and we still observe a mixed picture. However, we do not see any recession signals right now.

The fund ended the month slightly down, in line with the Bloomberg global HY index.

The new issue market was in a continued drought through the month of May as well. Very few new issues in high yield in both Europe and the USA. As the risk sentiment improved towards the end of the month, a few more companies did come with new deals and we feel that the more stable environment we see now will lead to interesting opportunities.

The fund had net inflows during the month and used inflows in both the primary and secondary markets. The fund participated in a new issue in May, which was TDC Net Senior Secured Sustainability Linked Bond. The company had to pay up a bit due to the negative sentiment that has existed for a while. The company has one of the most ambitious sustainability plans we have seen regarding Scope 3. It will be interesting to follow. The coupon came in at just over 5% in euros and it has been a very long time since we saw such levels for a strong BB company. Against that, we scaled down a bit in Virgin Media. In the secondhand market we brought in Schaeffler, Spief. We increased in Organon, Progroup, Belden and James Hardie at attractive prices.

ESG remains a strong focus for the fund, and we see that even in the US, banks are beginning to require companies to present answers to questions and plans for ESG in loan documentation. KPI data that measure certain key figures for companies' sustainability work are becoming increasingly common also in the corporate bond market globally.

The fund is classified as an Article 9 fund under the SFDR Disclosure Regulation.

The synthetic CDS credit index widened during May. The iTraxx Crossover index went from +429bp at the end of April to +439bp at the end of May.


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