Portfolio Manager comment Coeli Nordic Corporate Bond Fund I-SEK July 2021

Nordic Corporate Bond Fund (Class R) advanced during July with 0.57 percent. Since year-end, the NAV per share has consequently increased by 4.43 percent. Global markets had another good month in July, although the rapid spread of the covid-19 delta mutation had a negative impact on sentiment at the beginning of the month. In the bond markets, the low-risk segments developed best when government bond yields fell back in both the US and Europe. The US real interest rate was quoted at its lowest level ever in July. Credit spreads widened somewhat, especially in the high-yield segment. Nordic corporate bonds developed relatively better than the rest of Europe, albeit with limited trading and price movements as a result of ongoing summer holidays.

The largest contributor of the month was the consumer credit company 4Finance, which announced that one of the company’s two bonds had been refinanced and the term had thus been extended by three years. With the refinancing and previously completed repurchases, the aim is now set to refinance the company’s other bond (which Nordic Corporate Bond Fund is invested in) during the autumn.

The Norwegian payment service company Convene also made a larger contribution; the company’s bonds have developed strongly since the company’s report for the first quarter was presented in May. No significant news was released in July.

Minor negative effects on the result came from the credit management companies Hoist Finance and Intrum. Hoist reported lower revenues due to low investment over the past year. However, significant cost savings meant that the operating margin improved while leverage decreased. Intrum’s report was fairly neutral with relatively weak development for contract debt collection, which was balanced by strong results from acquired debt portfolios.

During the month, an investment was made in newly issued bonds from Crayon Group, a globally leading consultant in software and digital transformation. Crayon operates in a market that is undergoing structural growth, in recent years the company has reported steadily increasing revenues while margins have improved. The customer base is large and diversified with a very high proportion of repeat customers, which bodes well for continued favourable development in the coming years.

As expected, the US Federal Reserve (Fed) announced an unchanged Fed funds rate in the range of 0.0-2.5 percent, as well as unchanged asset purchase volumes in the market. Chairman Powell continues to express that the US economy has a long way to go to a stable level of inflation and a maximum employment rate. Disturbing news about the Corona virus has come during the month in the United States, with the spread of the Delta mutation. In the last two weeks, the rate of infection has increased by a factor of four on a national level, at the same time as the rate of vaccination has slowed down, c 50 percent of the American population is now fully vaccinated.

During the month, the ECB also expressed concern about the Delta Mutation and warned that the mutation poses a major risk to the euro area’s economic recovery. The central bank announced during the month that they will change their inflation target from a maximum of 2 percent to an inflation rate of 2 percent. It may seem like a minor item, but this opens for lower interest rates during a longer period than previously forecasted and for continued monetary stimulus. The central bank expects an inflation level of 1.9 percent in the current year and 1.5 percent in 2022.

The European and Nordic credit markets showed somewhat higher credit spreads during the month in both the high-yield segment and the investment-grade segment. Stibor 3-months was noted at -0.02 percent, which is at a higher level compared to end of June.