RBF UCITS Monthly - October 2017

•   The Fund’s IDUSD Class was up 0.33%
•   Offshore renminbi up 0.24% versus dollar
•   IMF raises global growth forecasts for 2017 and 2018; China’s at 6.8% for 2017
•   US data robust; but inflation lacklustre and fiscal policy in progress

A mixed October saw the yield on the 10-year US Treasury yoyo from lows of 2.27% to highs of 2.475%, eventually closing only 5bps higher on the month, at 2.38%. Improving US economic data prints, excitement around the drafted tax-plan and anticipation surrounding the Fed Chair position fuelled the initial sell-off in US Treasuries and rally in the dollar; which broke through 94, measured by the DXY Index, up 1.59% over the month. Meanwhile, Brent futures enjoyed a rally to two-and-a-half year highs, rising above $60 per barrel, off the back of the expected supply cut extension, and the offshore renminbi gained 0.24% against the dollar.

The IMF bumped up its global growth forecasts to 3.6% in 2017 and 3.7% in 2018 (from 3.5% and 3.6%, respectively) as a result of further economic expansion in China, the US, eurozone and Japan. The Fund suggested that policymakers should take advantage of the current benign global economic environment to boost growth within their economies, as a protective measure against the next financial downturn. The IMF warned that wealthier nations should consider keeping monetary policy loose until inflation firms up. The Fund forecasts China growth at 6.8% this year and 6.5% for 2018, while PBoC governor Zhou expects growth at 6.9%. He also highlighted concerns over corporate debt, adding that the central bank’s priority is to deleverage and manage financial risks.

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RBF UCITS Monthly - September 2017

  • The Fund’s USD ID Class was down 1.41% in September; up 13.01% year to date
  • Fed held rates, but more hawkish rhetoric insinuates a further rate hike in December
  • China data remains resilient; growth expected within target
  • Russia's long-term debt outlook upgraded to positive by Fitch
  • Tax reform and subsequent effect on debt ceiling will be monitored closely

A mixed month across asset markets was once again driven by geopolitics and central bank rhetoric. Fed Chair Yellen’s seemingly hawkish tones drove a sell-off in UST yields; this was further compounded by the proposed ‘revolutionary’ US tax plan. What concerns us is the tax-plan’s eventual effect on the debt ceiling; we expect to hear more on this by year-end. Nonetheless, the yield on the 10-year UST was up 22bps and USD gained momentum; the DXY Index closed the month 0.44% higher. 

Meanwhile, the Fed held rates at 1%-1.25%, we heard further mixed messages from Fed members with those in acceptance of lowly inflation calling for further hikes, while others remained concerned of hiking too quickly with lacklustre price pressures. The futures market, however, received a wake-up call after Yellen’s address, where she reiterated that a December hike is clearly a possibility. Gold unsurprisingly nosedived in September; meanwhile Brent rallied 7.48%. 

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RBF UCITS Monthly - August 2017

  • Chinese renminbi rallied against the dollar; currency is up 5.74% year-to-date
  • The Fund’s ID USD  Class was up 3.15% in August; +14.63% year to date.
  • US Treasury and Middle Eastern holdings outperformed
  • US-North Korea tensions expected to remain elevated
  • Expect renminbi to continue steady appreciation; benefiting from safe haven flows

Geopolitics commanded market focus in August as North Korea launched a number of threatening ballistic missiles. US-North Korea tensions overshadowed broadly positive data releases out of the US where, for example, the second estimate for Q2’17 GDP was revised up to 3% and the US ISM manufacturing reading for August bounced to its highest reading since 2011. Towards the end of the month, US Treasury yields dipped to their lowest level so far this year, and closed 18bps lower over the month, at 2.12%. Meanwhile, the dollar also suffered further weakness, with the DXY index falling 0.21% in August, having also tumbled to year lows during the month.

Elsewhere, the Chinese renminbi rallied to 15-month lows against the dollar; gaining 5.74% so far this year, on a spot basis. We calculate the carry on the offshore currency stands at 3.16% year-to-date, with total return at 8.9% against the dollar. China data releases remained supportive of growth last month.

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RBF UCITS Monthly - July 2017

  • The Fund’s USD I Class was up 1.75% in July; +11.12% year to date.
  • China’s economic data robust, offshore renminbi up 0.75% against dollar
  • Fed left rates and QE unchanged; balance sheet unwind to start ‘relatively soon’
  • US data continues to broadly disappoint; IMF revises US growth forecasts lower

A broadly positive month witnessed a collapse in cross-asset volatility; the VIX index fell to all-time lows during the month, while the Merrill Lynch Move Index dived to its lowest level since it was first published in 1988. The Move Index measures the volatility on one-month UST options based on the 2,5,10 and 30-year benchmarks. Other big moves came from commodities: Brent crude rallied 9.87%, and copper traded up 7.28% over the month; off the back of better than expected China data.

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RBF UCITS Monthly - June 2017

• The Fund’s USD I Class was down 0.27% in June
• Fed hiked rates by 25bps to 1%‐1.25%. Balance sheet unwind expected later this year
• US data continues to broadly disappoint; IMF revises US growth forecasts lower
• IMF upgrades China growth to 6.7%. China data remains stable
• MSCI Inc announces China A‐share inclusion in EM Index. ‘Bond Connect’ launches in July

A mixed month for asset classes saw market sentiment driven mostly by new‐found central bank hawkishness. The Fed hiked rates by 25bps to a still historically low range of 1%‐1.25%. The Fed also announced that caps will be applied to the reinvestment of maturing assets in the unwind of the balance sheet, and expectations are for a September announcement, with some members calling for a ‘glacial’ and ‘baby step’ approach. US data releases through last month were broadly disappointing, although the Fed said it is not going to let data ‘noise’ detract it from its course of normalisation, markets were still impacted. The yield on the 10‐year US Treasury, for example, fell to year lows after the weak retail sales and disappointing CPI readings were released for May. However, on the back of the more hawkish Fed rhetoric, and broader positive market sentiment towards global growth, although still subdued ‐ alongside lacklustre inflation ‐ the yield on the 10‐year UST bounced 10bps higher to 2.31%. The dollar (DXY Index) however remained on the back foot falling 1.34% over the month.

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RBF UCITS Monthly - May 2017

• Positive month sees Fund’s USD I Class gain 3.09% in May; up 9.51% ytd
• US data broadly surprised to the downside; inflation remains stubbornly low
• PBoC added “counter-cyclical factor” tweak to fixing mechanism
• Russian quasi-sovereign issues continue to outperform
• US Fed remain on track to hike in June

In May geopolitics in the US and Brazil dominated focus in what was generally a positive month for credit markets. The 10-year US Treasury benefitted from the broader risk-off tone falling 8bps to 2.20%, while the dollar remained on the back foot once again, falling 2.15%, measured by the DXY index. President Trump came under fire as allegations that he had obstructed a federal investigation hit the newswires; with some commentators calling for his impeachment. Some semblance of normality followed the knee-jerk reactions after Trump’s first foreign trip was deemed a ‘success’. US data however remained mixed and concerns over stubbornly low inflation remained a theme; the Fed’s favoured core PCE deflator reading (at 1.5% yoy) fell to the lowest level since December 2015.

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RBF UCITS Monthly - April 2017

• The Fund’s IDUSD Class gained 0.64% in April
• Sino-US trade relationship sentiment improves
• US data disappoints, while China’s economy remains resilient
• Sovereign holdings in the Middle East outperform along with US Treasuries
• Futures markets pricing in a US rate hike in June

A broadly mixed month across asset classes saw the yield on the 10-year Treasury fall to year lows of 2.169% during the month on the back of heightened global geopolitical concerns, however market sentiment improved into month-end and the benchmark eventually closed at 2.28%, 11bps lower on the month. Oil prices remained volatile once again in April, with Brent crude climbing to highs above $56.60 mid-month and falling back below $52; down over 2% over the month. Meanwhile equity markets continued their rally with the likes of the DAX index racing to all-time highs, while the VIX Index, a measure of volatility spiked to 5 month highs above 16, ending the month at 10 year lows.

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RBF UCITS Monthly - March 2017

• Fed hiked rates by 25bps to 0.75-1%
• China data remains supportive of growth momentum
• Fund’s USD I Class gained 0.43% in March
• Sovereign and quasi-sovereign issues from the Middle East outperformed
• Added a number of new issues including Oman and Kuwait government

A mixed month saw the yield on the 10-year US Treasury spike as high as 2.627% during March, eventually closing marginally lower over the month at 2.388%; as Trump-euphoria began to wane. The President abandoned the health care bill vote, thus expectations for future reform - such as the deployment of fiscal spending and the overhaul to the tax bill - hung in the balance. Softer US sentiment saw the dollar continue its retreat through the month, falling 0.76%. Meanwhile, as was widely expected, and priced in, the FOMC hiked the Fed’s funds target rate by 25bps mid-month to 0.75-1%; the futures market ended the month pricing a 56.7% chance of a further hike in June this year.

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RBF UCITS Monthly - February 2017

• Positive month for bonds; Fund’s USD I Class gained 0.96%
• Stronger data and Fed speaker comments shift market expectations to a March rate hike
• Credit markets well supported and new issuance was readily absorbed
• US dollar strengthens on a trade weighted basis;
• Fund’s 100% CNH overlay has gained 1.79% year-to-date against the strong US dollar

February was a positive month for asset markets: equity markets such as the S&P 500 reached new highs as data releases buoyed optimism about an improving growth outlook. Accompanying this, market expectations for a US rate rise shifted forward so that by month end the Fed Futures were discounting ~80 percent chance of a rate hike in March having been closer to 30 percent earlier in the month. This reflected a slew of generally strong data releases, Janet Yellen’s testimony to US congress and commentary from Fed officials. Later in the month, William Dudley, a known ‘dove’ and voter on the FOMC, stated ‘the case for monetary policy tightening has become a lot more compelling’. In spite of this, the yield on the 10 year US Treasury compressed 6 basis points to end the month at 2.39% and the yield curve flattened; we see the Fed as acting ahead of the curve and expect the yield curve to continue to flatten. The US dollar index gained 1.62% over the month helped by the stronger data and mounting expectations for a rate rise.

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RBF UCITS Monthly - January 2017

• Offshore renminbi (CNH) appreciated 2.17% against the dollar
• The Fund’s USD I Class gained 4.10% in January.
• China data releases indicate economic stabilisation
• Largest contributors to performance were holdings in Middle East and CNH overlay
• The more dovish Fed is on hold given the uncertainty of the new US presidential administration

A broadly positive month for risk assets saw the offshore renminbi appreciate 2.17% against the dollar, and 2.79% on a total return basis. Last month President Xi Jinping took centre stage at the World Economic Forum in Davos, the first for any Chinese leader. High up on his agenda was the importance of economic globalisation and free trade; in the face of less trade-friendly US rhetoric. Jinping also echoed what Chinese policymakers have reiterated time and time again, that it is not their wish to devalue the renminbi to make exports more competitive. Instead their intention is to manage the redback against the recently expanded CFETS currency basket; of which the dollar is a large component. With non-manufacturing activities making up over half China’s GDP, coupled with the efforts to reform the country’s economy to more sustainable, consumer-led growth it would be counterintuitive to devalue the renminbi.

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RBF UCITS Monthly - December 2016

• Fed raises rates by 25bp to 0.75%, and forecasts three rate hikes in 2017
• Trump rally sees the dollar hit all-time highs; renminbi remains stable against CFETS basket
• China data surprises on the upside, economy is stabilising
• Russian quasi-sovereign holdings outperform
• A cloud of political uncertainty lies ahead

Markets ended on a more positive note last month, but the year closed with a dark cloud of political uncertainty hanging over Brexit and the Trump administration. As we had expected, the Fed raised rates by 25bps to 0.75% and pencilled in an additional hike in 2017; taking it to three forecasted hikes. The Treasury market swung around in December, with the yield on the benchmark 10-year peaking as high as 2.60% post-Fed announcement, finally closing at 2.45%. The dollar also gathered pace, hitting an all-time high ahead of the month-end; the DXY Index closed 0.7% higher on the month.

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RBF UCITS Monthly - November 2016

• A tumultuous month across asset markets resulting from the unexpected US Election outcome
• Renminbi remains relatively resilient against the stronger dollar, versus other major currencies
• Global bond yields reprice as growth and inflation expectations are revised
• China’s PMIs indicate increased economic confidence and stability
• The Fund’s USD I Class fell 5.80% in Novemberbut remains up 0.92% YTD

A tumultuous month saw Donald Trump's unexpected win push befuddled financial asset markets to extremes. Hypersensitive markets saw the dollar’s 3.1% (DXY Index) gain pretty much wipe out most emerging market currencies over the month; after the US presidential election result was announced. The only emerging market currencies to have actually remained resilient against the dollar’s onslaught were the Taiwanese dollar, Russian rouble and the Chinese renminbi. The Turkish lira took the hardest beating, falling over 9%. Comparatively the rate was down 1.65% over the month, and has continued to strengthen against its anchor, the CFETS basket of currencies.

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RBF UCITS Monthly - October 2016

• China’s economic data releases surprise on the upside
• “Hard Brexit” concerns dominated markets through October
• Possible Fed hike in December coupled with ECB QE tightening concerns and revised inflation expectations saw global financial assets sell-off
• Renminbi added to IMF SDR basket; PBoC continue to maintain currency stability against CFETS basket

China’s data releases for September surprised on the upside; retail sales and industrial production were in-line with expectations and CPI beat the market consensus at 1.9%yoy with PPI bouncing into positive territory. The Q3’16 GDP reading matched market expectations at an annualised 6.7%yoy, unchanged from the previous quarter and on track to meet the government’s 6.5-7% target. The services sector once again expanded at a faster rate than the rest of the economy, contributing over 50% to growth. The Purchasing Managers releases for October remained supportive with the official manufacturing print bouncing to a 26 month high and in-line with the private Caixin reading, at 51.2. New orders, employment and raw materials all increased; this has seen some market makers bearish on China rethinking their forecasts and strategies. The non-manufacturing reading also surprised at 51.2, bouncing 1.1 points.

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RBF UCITS Monthly - September 2016

•The Fed held rates leaving door open for a December hike
• BoJ moved to steepen the JGB curve
• OPEC production cut “agreement”; oil rallied
• Russian quasi-sovereign bonds outperform
• Global growth momentum is slowing; could be time to deploy fiscal tools

September witnessed a rollercoaster month as asset markets were once again on tenterhooks, awaiting central bank monetary policy announcements; particularly from the BoJ and Fed. As we had expected the BoJ moved to steepen the JGB curve, by launching 'QQE with Yield Curve Control', or Quantitative and Qualitative Monetary Easing with 10-year yield cap at 0%, and the Fed maintained the status quo; leaving a hike in December on the table. The futures market appeared confused with all the mixed FOMC member rhetoric throughout the month, finally ending the month pricing in a 59.3% chance of a hike in December. The Fed’s median forward guidance was revised down to two rate rises, from three, in 2017.

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RBF UCITS Monthly - August 2016

• Fed chatter sees market odds for next hike revised to December
• Another positive month; Fund’s USD I Class gained 1.00%
• Russia and Middle East quasi-sovereign holdings outperformed
• We look to maintain a bias in the long-end with a high weighting in US Treasuries


In another relatively quiet August, market focus remained on central bank moves. Increasingly hawkish Fed rhetoric saw 10-year US Treasuries rise 12bps off the previous month’s lows, to 1.58%. Most Fed members, including the known doves, appeared to reprice the market’s odds for a hike in December this year, from March 2017; the dollar gained momentum in the second half of the month, up ~0.5% (DXY Index). Meanwhile the BoE delivered a 25bps rate cut, expanded its QE program and introduced a Term Funding Scheme.

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RBF UCITS Monthly - July 2016

• Central banks thrown off by Brexit aftershock
• Q2’16 US growth weaker-than-expected
• Fund’s USD I Class gained 2.09% in July
• Offshore renminbi gained 0.67% against dollar

The Brexit effect rippled through markets last month throwing central banks into defensive mode; the US Fed held rates and the BoJ doubled its ETF buying programme in addition to the surprise JPY28tn (~5% of GDP) fiscal stimulus package. As default UK Prime Minister Theresa May readied her cabinet to prepare for “Brexit means Brexit”, the BoE also kept rates on hold at 50bps catching some market observers off-guard as consensus was for a 25bp cut*. The BoE clearly indicated that it will take action at the next meeting in August, no doubt armed with more post-referendum data releases to support the decision. The pound stabilised somewhat in July, helped by a weaker dollar resulting from the worse-than-expected Q2’16 US GDP reading, which also saw US Treasuries rally into month-end; the 10-year benchmark closed at 1.45%. The IMF once again revised global growth estimates lower, to 3.1% citing Brexit’s “sizeable increase to uncertainty”.

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RBF UCITS Monthly - June 2016

• UK EU Referendum dictated market sentiment, UK votes to leave EU; UK is downgraded
• Rollercoaster month across asset classes; safe-haven bond yields plummeted
• Influential central banks on hold; futures pricing in next Fed fund rate hike in 2018
• Fund’s USD I Class gains 2.02% in June
• Renewed global growth concerns

The UK EU Referendum in/out opinion polls shook markets all about last month; 51.9% of the British public voted to leave the EU, the consequent damage to market sentiment was extremely visible. Having soared to yearly highs ahead of the referendum results (as the remain camp appeared to take lead), the pound plummeted, trading at its weakest level since 1985 and finished 8.5% lower on the month; the worst performing currency against the dollar. Both S and P and Fitch downgraded the UK’s credit rating to AA and Moody’s put its Aa1 rating on negative watch.

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RBF UCITS Monthly - May 2016

•   Brent crude gains ~3% on the month
•   Fed rhetoric turns hawkish; members state 2-3 rate hikes possible this year
•   China data indicates stability
•   US Treasuries and Russian quasi-sovereign holdings remain supportive

Asset markets were very mixed in May. FOMC rhetoric switched midway through the month, erring on the hawkish side and Brent breached the $50 level during the final week, gaining 3.24% over the month. The yield on the 10-year US Treasury was pretty much unchanged, closing at 1.85%, while the 2-year fell 10 basis points (bps) to 0.784%, after some Fed members commented on the prospect of 2-3 rate hikes this year, starting as early as June.

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RBF UCITS Monthly - April 2016

  • Fed’s dovish tone and weaker US data saw further dollar weakness
  • Pick-up in China data tempers Fed’s global economic & financial development concerns
  • The Fund’s USD I Class gained +0.52%
  • Holdings in the Middle East and Russia performed well

The risk-on sentiment broadly continued in April although performance was somewhat tempered as market activity was once again dictated by central bank action and crude prices. We had the BoJ wrong-foot some investors by leaving its three key easing tools unchanged. The bank's inaction saw the yen continue its upward assault against the dollar, gaining ~5.6% over the month. Meanwhile, the Fed unsurprisingly left the funds rate unchanged, although it sounded slightly more upbeat about the risks of global economic and financial developments; after the recent pickup in economic data out of China. The broadly dovish tone saw the dollar weakness continue for the third consecutive month. Meanwhile, having surged to 1.93% ahead of the meeting, the yield on the 10-yr US Treasury closed at 1.83%; only 6bps higher.

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RBF UCITS Monthly - March 2016

  • The Fund’s USD I Class was up +4.39% in March and +6.15% in Q1’16
  • Risk-on rally across asset classes. Brent crude up 10%
  • The offshore renminbi appreciated 1.37% against the dollar
  • Holdings in Russian quasi-sovereign and China issue outperformed

After what was a very volatile start to the year, March ended the quarter with a risk-on rebound as the ECB delivered further easing (in excess of market expectations) and Fed members revised their dots lower. Commodities witnessed the largest rally; Brent crude surged over 10% over the month helped by rumours of a Saudi-Russia led supply freeze. The Fund’s USD I Class was up +4.39% over the month and +6.15% during the first quarter.

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