Nordic Corporate Bond Fund (Class R) advanced with 0.11 percent during November. Since year-end, the NAV per share has consequently increased by 4.70 percent. After a good start to the month, November ended in the red with falling prices for risky assets such as equities and corporate bonds. Gold and long-term government bonds, which are common safe havens in times of unrest, strengthened on the other hand. Sentiment was negatively affected by increased infection rates and the discovery of the new Omicron mutation. In addition, concerns remain about high inflation, energy shortages and disturbances in the global supply chains.
During the last week, there was a marked increase in credit spreads, causing falling prices of most of the interest-bearing holdings in the portfolio during the month. Overall, the result from investments in corporate bonds was however positive thanks to contributions from the current interest rate.
Among the month's largest contributors was the consumer credit company Bayport, whose quarterly report largely lived up to expectations, with slightly weaker revenue development offset by lower credit losses. The company stated that it aims to refinance the two bonds maturing in 2022 during the second quarter of next year. Furthermore, 4Finance reported its strongest quarter since the outbreak of the pandemic. The strong development is due to both improved net interest income and lower credit losses. Covered bonds from, among others, Länsförsäkringar Hypotek and Swedbank Hypotek developed well when market interest rates fell.
On the negative side, there were mainly real estate companies where bonds from, among others, Akelius and Heimstaden Bostad were marked lower. The sector was negatively affected by the general concern about inflation and rising expectations of future interest rate hikes. In addition, investors' appetite for bonds in the sector is likely to be saturated after large volumes have been issued during the year.
During the month, the acquisition driven conglomerate Storskogen returned to the portfolio through an investment in newly issued four-year bonds. Storskogen was sold as late as October when valuation was considered high, but the new issue in November was placed at much more attractive levels. Further investments were made in bonds from the consulting firm AFRY. A couple of additional investments were made in bonds from IF P&C Insurance and Crayon Group, among others.
Bonds from Logistea were sold after a short holding period during which the credit spread tightened markedly. At the end of the month, the portfolio consisted of 74 holdings from 58 different issuers.
November can be summed up as an eventful month, both globally and in Sweden. Where increased infection rates of Corona, a new mutation and increased inflation concerns left their mark on the financial markets. Mid-November, infection rates were once again at such high levels that some countries in Europe decided to reintroduce restrictions, among them Austria introducing a full-scale lock-down for the unvaccinated. At the end of the month, there was concern about a new mutation, Omicron, which was first discovered in South Africa. This resulted in reduced risk appetite and concerns about new lock-downs. At the time of writing, cases of the mutation have been confirmed in the United States and in a number of European countries.
The US Federal Reserve announced, as expected, that a reduction in bond purchases will begin in November by USD 15 billion per month. Tapering is expected to be completed during the summer of 2022, but is still uncertain as it will be adapted to the development in the economy, as the Fed has been clear in pointing out. "It is a good time to retire the word transitory regarding inflation", the words are from Fed Chairman Powell who at the end of the month emphasized that the rise in inflation has widened and the new Omicron mutation means risks of inflation staying at higher levels are increased.
An increase of the US debt ceiling has been overshadowed during the month's other news flow. The risk of a shutdown of the federal state apparatus remains and funding will end on December 3. As is well known, this was avoided at the last minute earlier in the autumn after the two political parties managed to agree on a temporary solution, which now expires. However, the rhetoric has been somewhat toned down this turn where, among others, the Republican minority leader Mitch McConnell has said that an agreement will go through. The alternative, an official payment default has never taken place and would hit both the global economy and the financial markets worldwide severely.
The Swedish Riksbank left the policy rate unchanged at 0.0 percent and according to their forecast, the first interest rate increase is expected in the latter part of 2024. The Riksbank also stated that purchases of bonds of SEK 37 billion will be made during the first quarter of 2022, to compensate for future maturities in the securities portfolio.
The European and Nordic credit markets showed widening credit spreads in both the high-yield segment and the investment-grade segment, during November. Stibor 3-months was noted at -0.10 percent. The Swedish ten-year government bond was quoted at the end of the month at 0.17 percent and has thus decreased by 22 basis point during the month. The US ten-year government bond was quoted at the end of the month at 1.43 percent, 12 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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