The return in AMF Företagsobligationsfond amounted to 2.1 percent during the third quarter of the year, which can be compared with 0.9 percent for the fund’s benchmark index. The fund showed a good return supported by the high interest rate situation, but the biggest contribution came from the reduced credit spreads for real estate bonds in end of the quarter. The fund had a duration in the shorter range during the period.
“Interest rates went down a little during July, driven by lower inflation figures mainly in the US. After that, we have seen continued strong macro data and inflation that has generally surprised on the upside,” says the fund’s manager Johan Moeschlin.
Most central banks raised their key interest rates during the period and the fund’s manager believes that it looks like the banks are approaching the top of the interest rate cycle. However, inflation is still too high and now more and more people believe that the central banks will allow interest rates to remain at a high level for a longer period of time.”A recurring theme in the Riksbank’s communication has been that their decisions are made based on incoming data and our main scenario is that we get see another increase in November as the weak krona continues to keep inflation up,” says Johan Moeschlin.
The market for corporate bonds developed weakly during the summer. In September, however, the manager saw a recovery for real estate bonds – a market many companies had difficulty entering in light of the high interest rate situation.
“The real estate companies have taken measures to limit their indebtedness, which is reflected in the fact that many are now issuing bonds with shorter maturities and attractive terms. Some more vulnerable companies have offered interest rates of up to ten percent, which is higher than the expected return on the stock exchange,” says Johan Moeschlin.
However, Moeschlin is clear that the challenges for real estate companies remain and therefore only invests in bonds with short maturities in companies that are considered stable. Otherwise, the high short-term interest rates were used to invest in commercial paper with a maturity of 3–6 months during the quarter.
An investment was also made in a three-year bond issued by the truck group Traton. The companies have so far managed to resist well, but some company managements have signaled that they are beginning to see signs of a slowdown.”Now the reporting period is approaching and it will be interesting to follow how the companies communicate about their prospects.
In the event of a slowdown in the economy, the choice of companies and sectors becomes even more important, as do the maturities we choose,” says Johan Moeschlin.