NFA Global Bond Fund UCITS Monthly - August 2019

  • The Fund’s QDUSD class gained 5.38% (net of fees) in August; +18.05% YTD

  • More mixed performance across assets as high grade and high yield diverged

  • Further tariffs on Chinese goods announced by the US

  • US yield curve bull flattened, biggest fall in 10-year USTRs since Jan 2015

  • Argentina primary election shocks, Brexit risks remain

  • We think there is much more “left in the tank” regarding our bond positions as valuations still “cheap”

  • The path for global rates is lower

Following on from the US rate cut at the end of July, August was a strong month for bonds in general, and those held in our portfolio in particular.

Discontent with the quarter-point rate-cut, Trump tweeted that “Powell let us down” and, against most of his advisors, went on to escalate the “trade war” with a further 10% tariff on $300 billion of Chinese exports from September 1st. China responded by firstly allowing the currency to fall below the psychological level of 7.00 versus the USD and later that month it announced it would also increase tariffs on roughly $75bn of US imports including agricultural goods, crude oil and autos.

Recessionary risks further increased as the US released its ISM Manufacturing report for July which failed to meet consensus and confirmed a near 3-year low reading of 51.2, only just above the expansionary level of 50 (and it subsequently broke below 50 in early September). The release of the Markit sponsored US Manufacturing PMI report hit a near ten year low of 49.9 later in August.

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