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Continued strength for Corporate Bond

After a couple of quiet summer months, market activity began slowly but surely to rise again at the end of August. Given the shortage of supply, strong fund flows and generally acceptable reports, risk sentiment has remained good.

Boris Johnson has requested the Queen to adjourn Parliament, which in effect prevents a hard Brexit being blocked. Relations between the US and China remain binary, and diverse economic signals continue to cause exchanges to switch between euphoria and despair.

The combination of uncertainties makes the environment increasingly difficult to navigate, and recently we have seen the world’s central banks completely U-turn. The Fed has cut rates, the ECB has signalled plans for new stimulus packages, and the Riksbank’s directors are grappling with policy. This has caused long-term interest rates to fall again.

Risk appetite remained strong over the summer and liquidity was good, which in combination with dovish central banks caused asset prices to continue to rise. Since the Nordic primary market slowly but surely began to take off during the latter part of August, it was still favourable for companies to seek financing. We participated in issues including those from Bonheur and Ocean Yield. Europe is, as usual, on holiday in August and its activity was relatively low.

Earnings reports came in from our high yield companies towards the end of the month, and we can see that it is outlooks that are suffering from the political concerns and failing economic signals, even though the results were generally acceptable. Market trading was relatively stable this month and most of the returns came from companies’ interest payments, although we are continuing to see some positive company-specific events.

 

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