Positive tones in November
After a weak October, the tone became more positive in November. The news of a coronavirus vaccine led to hopes that we are nearing the end of this pandemic and that communities can be opened up and eventually normalise. This naturally led to improved sentiment, and the credit markets had a strong month with increasingly tight margins.
The Riksbank chose to keep interest rates unchanged, but expanded its QE from SEK 500 billion to SEK 700 billion and extended it to December 2021.
Activity in the primary market picked up again in November, and investors were generally very interested after a quiet period last month. The fund participated in three issues. First came BBB+ rated mining company Epiroc, with a 5.5-year bond paying Stibor +80 basis points. Heimstaden Bostad (BBB-) issued a bond of just over 5 years at Stibor +130 basis points, and Hexagon issued a bond with a term of 6 years paying Stibor +125 basis points.
Aside from these issues, no major changes were made to the portfolio, but we extended our exposure to investment company Kinnevik and also to Nordea SNP. Senior Non Preferred (SNP) bonds are ranked behind traditional senior bonds but before subordinated bonds and hybrid capital.
Carnegie Investment Grade recorded a gain of 0.41 percent in November.
With the US presidential election behind us and a coronavirus vaccine underway, we seem to be heading towards the end of the year in a more hopeful spirit and with more stable markets as a result. However, the autumn has largely been marked by the pandemic and we are still living with shutdowns around the world. So far this year, most companies have gone through this with in some cases surprising stability. What impact this second wave had on companies remains to be seen in their Q4 reports.
Carnegie Investment Grade invests in well-managed, stable and sustainable companies. We prioritise a defensive and diversified portfolio, in line with our management philosophy.