Performance as at 30 June 2020
Performance is after the annual fund charge, and before tax and membership fees (if applicable). For more information, see legal information and disclaimers.
What happened this quarter (3 months to 30 June 2020)
- Bond markets had a relatively quiet quarter as accommodative central bank policy and economic uncertainty kept interests near multi-year lows.
- The fund’s GDP-weighted approach means it has a large exposure to US bonds, which recorded modest gains over the quarter amid ongoing accommodative policy from the Federal Reserve.
- Despite leaving interest rates unchanged, the Fed announced it would begin to buy up to US$750 billion in corporate bonds directly off companies to alleviate cash flow and other financing concerns. Furthermore, the purchase of corporate bonds would help keep interest rates low and the flow of credit smooth.
- The relatively quiet quarter for bonds was illustrated in the yield of the US 10-year government bond, which ended the quarter just 1 basis point lower at 0.66%.
- European (ex-UK) bonds also posted modest gains as the European Central Bank (ECB) delivered further stimulus to the economy, expanding its Pandemic Emergency Purchase Programme by €600 billion. At the meeting, ECB President Christine Lagarde described economic activity as “tepid” adding that the central bank expects growth to contract by 8.7% in 2020.
- By the end of the quarter, yields on German, Swiss, French and Dutch 10-year government bonds remained well in negative territory.
- Finally, the fund has an exposure to Japanese bonds, which had a relatively quiet quarter as the Bank of Japan left interest rates unchanged at its June meeting. The yield on the Japanese 10-year government bond ended the quarter at 0.02%, down 1 basis point.
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