Nordic Corporate Bond Fund (Class I) advanced with 0.35 percent during December. Since year-end, the NAV per share has consequently increased by 5.60 percent.
Among the month’s largest contributors was Norske Skog, which held a capital market day at the end of November. The company then emphasized that the market balance for publication papers is strong and provides scope for price increases. The two projects to switch production from paper to containerboard were reported to proceed according to plan, both in terms of costs and time.
The consumer credit company Bayport continued its strong trend from November and the bonds continue to approach par ahead of an expected refinancing during the second quarter.
Bonds from the real estate company Balder performed well after S&P revised the company’s outlook to ‘stable’ after it became clear that the offer for Norwegian Entra received a low acceptance rate. The credit management company Intrum also made a noticeable positive contribution when its bonds recovered parts of the late autumn decline.
Some negative impact on the result came from covered bonds, which declined as a result of rising interest rates.
During the month, bonds from Yrkesakademin were added to the portfolio, a leading company within commissioned and labour market training in Sweden. After a couple of tough years, the Yrkesakademin with a new management in place has undergone a turnaround with markedly improved profitability. The company is deemed to be well positioned for the increased spending on matching services and labour market training that are expected as a result of the rise in unemployment. Additional investments were made in subordinated bonds from the Bank of Åland and Protector Forsikring.
In the last month of the year, the US Federal Reserve (Fed) announced further downsizing of asset purchases, from the current USD 15 billion to USD 30 billion per month. This in response to growing concerns about inflation and it potentially is not as temporary as first assumed. Members of the Fed expect three interest rate hikes in 2022, compared with the half increase previously communicated (via dot plots), thus a withdrawal of the expansionary monetary policy is initiated. The inflation rate was measured at 6.8% during the most recent survey (November), which is the highest figure since June 1982.
President Joe Biden signed a new bill regarding public funding in early December, which prevented the US government from being shut down. This postpones the financing problem once again, with the next deadline in mid-February.
During the month, the ECB adjusted its inflation forecasts significantly compared with previous months. Chairman Lagarde communicated that the sharp upward revision is largely due to the increase in energy prices. Inflation is forecasted to land at 2.6 percent in the eurozone in 2021 compared to previously 2.2 percent and 3.2 percent in 2022 compared to previously 1.7 percent.
The Swedish Riksbank's minutes showed members continue to see a need for expansionary monetary policy in order to achieve the target of 2 percent inflation. In November, data from Statistics Sweden showed that inflation rose by 3.6 percent year-on-year, which was just above market expectations of 3.4% and the highest recorded since December 1993. Energy and fuel prices were a major reason for the rise. Adjusted for these figures, the inflation rate was 1.9 percent.
Just before Christmas Eve, the Swedish government announced new restrictions including working from home, seated serving, gatherings for more than 20 people may only take place while sitting, and that a maximum of 50 people may meet in private gatherings. Increased spread of infection and concerns about the Omicron mutation are the reasons behind the new restrictions.
The European and Nordic credit markets showed tightening credit spreads in both the high-yield segment and the investment-grade segment, during November. Stibor 3-months was noted at -0.05 percent. The Swedish ten-year government bond was quoted at the end of the month at 0.29 percent and has thus decreased by 12 basis point during the month. The US ten-year government bond was quoted at the end of the month at 1.52 percent, 9 basis points lower than the end of the previous month.
Portfolio Manager of Coeli Nordic Corporate Bond Fund
Senior Analyst
| Inception Date | 2014-06-18 |
| Management Fee | 0.5 % |
| Performance Fee | N/A |
| Risk category | 3 of 7 |
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