RBF UCITS Monthly - May 2019

  • The Fund’s IDUSD class lost 0.96 (net of fees)

  • Bonds outperform as US Treasury yields extend rally

  • Trade frictions weigh on the economic outlook

  • Fed in pause mode, but for how long?

Spreads have performed very well during the month in regard to the better rated assets; lesser rated assets have struggled and even resulted in individual names giving a negative performance on the month. Of course as mentioned above the long end of the US Treasury market out performed with a stunning price performance but other highly rated credits have performed with similar vigour.

The top performers during the review period were the long dated US Treasury bonds and the Mubadala 41’s, these issues made a very positive contribution to performance. Indeed the Middle East continues to perform well and continues to benefit from the inclusion in the JP Morgan index with the Abu Dhabi government bond holding maturing in 2047 also a top contributing bond. So far this year Abu Dhabi and Qatar are the best two country contributors with Saudi Arabia and the US also performing well along with Russia. On the month our Oman holdings were underperformers as the issuer had a difficult month due to continued worries over the government’s budget, however, Oman has been a positive contributor year to date. We will look for an opportunity to reduce exposure to Oman but prefer to wait for more realistic pricing to enact the reduction.

In terms of currency the Renminbi continues to be a drag on performance, as mentioned above. We do think the currency will perform later in the year as the US dollar starts to fade but in the short term the trade frictions will keep pressure somewhat on the Chinese currency unit.

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