Better Safe Than Sorry – Fixed Income Monthly

The Fund ended August with a modestly positive return. The general risk appetite was different from the usual summer lull given the highly anticipated Jackson Hole symposium towards the month-end and the regulation tightening in China around mid-August. For the rates market, Govt bond yields have rebounded from the local bottom (UST 10yr: +8bps, Bund 10yr: +8bps in August) as US labor market conditions continue to improve albeit with some uneven slacks in certain sectors. This has put some pressure on benchmarked products due to the unavoidable duration exposure in the index. Given our limited rates exposure by mandate (currently at 1.6 years) and a carry of ~250bps, the Fund has been able to offset some mild credit spread widening during the month.