Tentative buyers return

With a highly turbulent month behind us there is hope of a more stable future. The progress of the coronavirus has caused great concern globally, and it is still difficult to say when it will be under control and what the impact will ultimately be.

Mona Stenmark manages Carnegie Investment Grade together with Mikael Engvall

This turbulence, combined with a great deal of uncertainty, obviously affected the credit market and there was substantial price correction. The downside was amplified by significantly lower liquidity since a weak market naturally generates more sellers than buyers.

The subsequent price correction hit more or less the entire corporate credit market, and although the HY segment was affected more significantly the IG universe also suffered.

There were signs of tentative buyers returning to the market towards the end of March, albeit cautiously. The stabilisation of prices and the acceptance of the new levels by market participants is a positive development for liquidity to return.

Primary activity was essentially non-existent in March, with the exception of a few issues towards the end of the month. The world’s central banks have acted to calm the markets and counter the impact of the crisis. The Riksbank has bought government, municipal and housing bonds, and in early April will also buy commercial paper.

We have not experienced any issues with managing fund flows during the period and have had plenty of room for manoeuvre within the fund’s mandate. We have made sales to manage liquidity, and these were made in a balanced way to ensure the fund maintained its diversified and defensive profile with a slightly higher cash position. Carnegie Investment Grade returned -4.44 percent this month.

The fund invests in well-managed, stable and sustainable companies, but the ongoing uncertainty about the spread of the coronavirus means that are obviously considering how companies may be impacted. Credit margins are at historical levels following the price correction, and there are clearly opportunities to invest in companies at attractive terms while taking a cautious approach.

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