FP Carmignac Global Bond

US inflationary pressure eased a little in June, with the rate falling to 3.3%, but momentum remained strong in the labour market and in services where activity picked up again.

At its FOMC meeting, the US Federal Reserve therefore left its interest rates unchanged, with members predicting a cut by the end of this year.

The ECB knocked 25 bps off its key interest rate at its monthly meeting, but reiterated that any future cuts will be data-dependent.

In China, economic activity is showing signs of weakness, with industrial production and investment both slowing. The real estate sector is in crisis with investment and house prices falling.

Meanwhile, elections in a number of emerging countries made EM assets more volatile, although the situation has subsequently improved. Spreads widened

by 23bps, as reflected in the Itraxx Xover. However, bonds appreciated with 10-year yields down 10 bps in the United States and 16 bps in Germany.

The Fund ended the month with an absolute return that was positive but smaller than that of its reference indicator.

The main factors behind this performance were our long positioning in the energy sector and debt in local currency, especially in Mexico following the post-election bounce.

Our Itraxx Xover hedging also raised the Fund’s performance as credit spreads widened.

However, our currency strategies had a negative impact on Fund performance, particularly our long positions on the Japanese yen and Mexican peso.

In the current environment, with the US economy slowing, we are keeping duration relatively high at around 4.5,

Having strengthened our long positions on the short end of the US curve. We have also introduced some steepening strategies for the European curve by opening short positions on French Treasury bonds (OATs).

For emerging market debt in local currencies, we still prefer countries like Mexico and Brazil where real short-term interest rates remain extremely high.

We took advantage of the correction in Mexican local debt after the elections, strengthening our long position to benefit from the rally.

At a foreign exchange level, the Fund opened a long position on the Norwegian krone and Australian dollar. The Fund also remains long on the Indian rupee, Brazilian real and Chilean peso.

The Fund continues to be long on emerging market debt denominated in hard currencies within the EMEA region and Latin America.