In September, the Pacific Coolabah Global Active Credit Strategy (PCGA) returned +1.41% compared to the Bloomberg Global Aggregate Corporate Index which returned +1.17%.
Since its 10 October 2023 inception, PCGA’s USD share class has outperformed the benchmark by +1.76% p.a. net (+2.31% p.a. gross) with an absolute annualised return of +10.77% net of fees (+11.32% gross) compared to the index return of +9.01%.
PCGA’s current weighted average yield to expected maturity is 5.28% compared to the index’s 5.03%. PCGA’s weighted-average credit rating of A is one notch better than the index’s A- rating.
September brought a long expected 25bps rate cut from the Federal Reserve. This cut supported investor optimism and risk markets were generally buoyant, fuelled by a rebound in technology stocks. The S&P 500 closed the month up +3.6% and the Nasdaq was up +5.5%. European indices also ended in positive territory with the Eurostox 50 up +3.4% and the FTSE100 up +1.8%. The other notable mover was Gold, up almost +12% on the month closing above $3,800 per ounce.
Fixed income market volatility remained low with US 10-year yields down 8bps on the month to 4.2%. German and UK 10-year yields were down 1bp and 2bps respectively on the month and despite the collapse of the Bayrou government in France, French 10-year yields were only up 2bps. Research from Citi noted that the trading range for Bunds in 2025 is among the lowest since 1990, while Gilts experienced the narrowest range in that period, despite fiscal concerns in the UK. Credit markets performed strongly with European IG credit spreads tighter by 7bps to 77bps and US IG credit spreads finished the month 5bps tighter at 73bps.
September saw $216 billion in USD investment-grade credit issuance, marking the fifth-highest month ever by volume and the largest by number of tranches. The financial sector accounted for nearly 44% of the supply, bringing total YTD issuance to $1.35 trillion according to Bank of America.
Significant deals included Commonwealth Bank of Australia’s 5-year bond, which priced at the tightest-ever spread for a 5-year USD senior bond issued by an Australian bank in USD according to Citi. Oracle’s $18 billion multi-tranche issuance was a major market event, with high demand and bonds rallying post-issuance.
The Euro market saw €83 billion in IG issuance, with 37% from financials, including strong demand for bonds from banks like Nordea and Belfius. Notably, ABN Amro continued their successful issuance programme under the new harmonised EU Green Bond framework.
European SSA issuance included an inaugural deal from the Australian State of Victoria, which drew €17 billion in demand for a €2 billion deal, and a €5 billion climate bond from the European Investment Bank, both performing well post-issuance. Other significant deals came from the European Union, Italy, and Portugal.
