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Nordic Corporate Bond Fund (Class R) advanced 0.68% during November. Since year-end, the NAV per share has consequently increased by 2.23%.
Risk appetite took a big leap after the Federal reserve and several other central banks announced unchanged interest rates. This, together with continued falling inflation, has resulted in rapidly falling market interest rates and narrowing credit spreads. The US 10-year rate, which has been a leading baton for how risk appetite develops during the year, fell nearly 80 basis points in November to 4.20 percent. Credit spreads on European high yield bonds fell nearly 100 basis points down to 370 basis points. The sentiment shift in the market has been dramatic and the market is now pricing in five cuts in the US and Europe and 4 cuts in Sweden. Central banks are certainly softer in their language, but the message "higher for longer" is still the main line and there is dissonance with market pricing.
Although interest rates and credit spreads have been strong, yield levels are still historically high, especially in the Nordic region, and it remains challenging for many companies to refinance their debt. High yield levels provide a positive investment climate for corporate bonds at an aggregate level, while high financing costs combined with a softer economy increase risks in individual companies. All in all, an exciting environment for the active and selective investor.
Positive contributions to the month's results mainly came from fixed-rate bonds, which benefited from falling market rates. Subordinated bonds from Danske Bank performed well after the bank presented a strong quarterly report at the end of October. A rising net interest income, reduced costs and stable credit quality contributed to improved profitability. Bonds from Dometic also performed well, the company's quarterly report showed lower sales as expected but where profit margin and cash flow were surprisingly strong. During the month, Moody's confirmed Dometic's credit rating with a stable outlook.
Real estate companies as a group had a positive impact on the month's results where, above all, Heimstaden recovered parts of previous price declines, the company's liquidity looks adequate to handle upcoming bond maturities and the leverage in the parent company is backed by significant share values in Heimstaden Bostad. Norwegian communications company LINK Mobility also made a significant contribution after the company announced it was divesting its US operations.
Negative contribution to the result mainly came from Bayport, which presented a weak quarterly report with a lower-than-expected net interest income. Some negative contribution also came from Viaplay, which postponed the publication of its quarterly report due to negotiations with its largest shareholders, lenders, and bondholders regarding a potential recapitalization of the company. The report was published early on the first of December and the proposal to capitalize the company included, among other things, a larger equity issue, write-down of the nominal amount of the company's bonds and that the bondholders will be awarded shares as compensation for this.
During the month, bonds from the life insurance company Storebrand were sold and the holding of LINK Mobility was reduced.
Portfolio Manager of Coeli Nordic Corporate Bond Fund
Portfolio Manager of Coeli Nordic Corporate Bond Fund
| Inception Date | 2014-06-18 |
| Management Fee | 0.5 % |
| Performance Fee | N/A |
| Risk category | 3 of 7 |
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Before making any final investment decisions, please refer to the prospectus of Coeli SICAV I, its Annual Report, and the KID of the relevant Sub-Fund. Relevant information documents are available in English at coeli.com. A summary of investor rights will be available at https://coeli.com/regulatory-information-coeli-asset-management-ab/.
Past performance is not a guarantee of future returns. The price of the investment may go up or down and an investor may not get back the amount originally invested.