Performance as at 30 September 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 September 2020)
- Global bond markets had a relatively subdued quarter, with interest rates in most parts of the world hovering at or near all-time lows.
- After aggressively cutting rates and/or increasing quantitative easing earlier in the year, central banks held this accommodative stance throughout the quarter, reaffirming interest rates would remain low for a prolonged period of time. In fact, in September, the US Federal Reserve said it expects the fed funds rate to remain at zero through to 2023.
- The fund’s GDP-weighted approach means it has a large exposure to US bonds, which recorded modest gains as ongoing demand for government bonds from central banks' bond-buying continued. Over the quarter, the US 10-year government bond yield rose 2 basis points to 0.68%.
- Meanwhile, in Europe, government bond yields in several countries (Germany, Switzerland, France and the Netherlands) remained deep in negative territory as the European Central Bank continued to adopt heavily accommodative monetary policy. This included a €750 billion economic stimulus package, aimed at assisting the businesses and industries hit hardest by the pandemic. The stimulus package includes a mixture of grants and low-interest loans.
- The policy came as the eurozone recorded its worst GDP figures on record, with growth falling 12.1% in the second quarter. The worst-hit countries were Spain, which contracted 18.5% and France, which declined 13.8%.
- Adding to economic uncertainty, some countries in Europe began to experience a second wave of coronavirus cases, which may weigh on the economic recovery and see bond yields remain lower for longer.
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