Portfolio Manager comment Coeli Nordic Corporate Bond Fund R-SEK February 2024

Nordic Corporate Bond Fund (Class R) advanced 0.46% during February. Since year-end, the NAV per share has consequently increased by 1.98%.

The expected interest rate cuts have been postponed by a few months in both the US and Europe. Inflation is certainly continuing its downward trend, but not at the pace that the market had hoped for at the beginning of the year. Despite this, risk appetite has been strong, and both equity and corporate bond markets have taken note of the long-term trend of falling interest rates, together with a robust US economy and some signs of recovery in Europe.

The month showed relatively little change in the fixed income market. Credit spreads continued to narrow in both the euro area and the Nordic countries. It is welcome to see that credit spreads on real estate companies have now come down significantly from their highest levels and that bond issuance in the sector have accelerated. Overall, we continue to have a positive environment for corporate bonds.

Bonds from real estate companies continued their strong trend from last month and made significant performance contributions. Castellum had the biggest positive impact on the result, the company’s year-end report offered a bit of a mixed bag, rental income rose and margins improved at the same time as vacancies increased and the valuation of the company’s properties was adjusted down relatively sharply during the fourth quarter. However, Castellum is judged to be on solid ground after last year’s share issue and property divestments. Balder also gave a good contribution after releasing a report that met expectations with modestly rising revenue and stable margins. After the report, Balder carried out a share issue where the proceeds were used to buy back subordinated bonds. Bonds from Heimstaden AB, however, differed from the crowd and fell in value, this after the operating company Heimstaden Bostad announced that it is canceling the dividends on its shares.

On the negative side, one mainly found bonds from Intrum, which continued to trade weakly at the beginning of the month. However, the negative trend was broken after the company announced a tender offer for parts of its outstanding bonds. Intrum’s buybacks send signals that the company’s management is comfortable with the liquidity situation and that the buybacks are being used in a beneficial way to reduce the debt burden.

During the month, bonds from Storskogen and Dometic were sold, in both cases the bonds appeared to fully appreciate with limited potential for continued excess returns. Divestments also took place of subordinated bank bonds from Swedbank, SEB and Danske Bank. During the month, the fund participated in an issue of green bonds from Scatec, a Norwegian issuer active within renewable energy. In addition, the holdings of bonds from Gjensidige and DNB were increased.