BY BILL HARER, HEAD OF FIXED INCOME - CREDIT RESEARCH & UK INDEX LINKED FUNDS AND MIKE COUNT, SENIOR FUND MANAGER
July was a more muted month for fixed income market returns, as government bond yields stabilised following their move higher in the first week of the month. This was the result of slightly less dovish comments emanating from the Bank of England (BoE) and the European Central Bank (ECB). This change in sentiment saw yields spike, but they have since trended back down as inflation has rolled over and wage growth has remained relatively stagnant. We believe this will be reflected in new trading ranges for both corporate and government bonds through the rest of the year.
Corporate credit outperformed again in July and has continued to be well supported. This has been reflected in the healthy interest for new issues, which were all oversubscribed. Interestingly, financials did very well again in July, despite the slightly more volatile environment and our long-term overweight in insurance continues to benefit both the CF Canlife Corporate Bond and CF Canlife Short Duration Corporate Bond funds.
We were also active in the primary market, participating in new issues for Annington, the property firm, and Anglian Water for the CF Canlife Corporate Bond Fund. Short-dated credit was also still very much in demand in July, and the CF Canlife Short Duration Corporate Bond Fund bought into new issues for ABN and Credit Mutuel covered bonds. We also added some collateralised exposure and some UK residential mortgage backed (RMBS) bonds. As short gilt yields have risen a little, due to the expectation of no further rate cuts, reinvestment yields are a little better.
Past performance is not a guide to future performance. The value of investments may fall as well as rise and investors may not get back the amount invested. Income from investments may fluctuate. The content of this article is not intended as investment advice.
The information contained in this document is provided for use by institutional investors, professional investors and professional advisers and is not for onward distribution to, or to be relied upon by, private investors. No guarantee, warranty or representation (express or implied) is given as to the document’s accuracy or completeness. The views expressed in this document are those of the fund manager at the time of publication and are subject to change at any time without notice. This document is issued for information only by Canada Life Investments. This document does not constitute a direct offer to anyone, or a solicitation by anyone, to subscribe for shares or buy units in fund(s). Subscription for shares and buying units in the fund(s) must only be made on the basis of the latest Prospectus and the Key Investor Information Document (KIID) available at www.canadalifeinvestments.com.
Canada Life Investments is the brand for investment management activities undertaken by Canada Life Asset Management Limited, Canada Life Limited and Canada Life European Real Estate Limited. Canada Life Asset Management Limited (no. 03846821), Canada Life Limited (no.00973271) and Canada Life European Real Estate Limited (no. 03846823) are all registered in England and the registered office for all three entities is Canada Life Place, Potters Bar, Hertfordshire EN6 5BA. Canada Life Asset Management is authorised and regulated by the Financial Conduct Authority. Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
CLI00881 Expiry on 15 November 2017