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Holiday markets and a positive outlook

The summer doldrums arrived, and July was a quiet month on the credit markets, especially the primary market. However, there was dramatic movement in government bond yields, which fell quite sharply, not just in Sweden but also globally. The reasons for this fall, especially in longer-term interest rates, have been a matter of discussion since strong inflation figures from the US should really spark falling rates.

One explanation could be concern that there will be a new wave of Covid-19, despite the vaccinations, which would then risk slowing the recovery. If the US Federal Reserve, in turn, were to act on rising inflation by upping interest rates, this would mean a risk of dampening the more long-term growth.

July brought a large number of corporate reports for the second quarter, which have generally shown continued stability, at least from a credit perspective. Last month, we invested in SSAB’s five-year sustainability-linked bond, and the company released a strong interim report in July at the same time as its credit rating was revised to a “positive outlook”. This means that SSAB is one step closer to investment grade. A boost to investment grade would generate a positive price movement in the bond.

Credit margins have largely moved sideways during the month and are still at compressed levels. It is still the height of the holiday season, and market activity is likely to remain low for a couple more weeks.

Carnegie Investment Grade invests in well-managed, stable and sustainable companies. We prioritise a defensive and diversified portfolio, in line with our management philosophy.

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Carnegie Investment Grade invests in bonds issued by Nordic companies. The fund focuses on corporate bonds with high credit ratings, known as investment grade. Investments are never made in a...

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