DNB High Yield Update August 2019

All numbers are in the relevant share class currency and YTD means end of July 2019.

July was relatively calm. Early and mid- July, markets were affected by moderate but decent fundamentals in the US and a more mixed picture in Europe. Easing monetary policies continued to be a theme. Towards the end of the month, sentiment worsened due to US-China trade war escalation.

The fund returned around 0.77 percent in July. The main positive contribution was accrued interest in addition to some other smaller contributors. We participated in two new issues in July and view the primary market as selective with good supply of new issuers. The fund is well diversified, and any single credit event will only have a moderate effect on the funds return.

With a yield around 7 percent and a well-diversified portfolio, we still view risk reward as good. The investor base in the Nordic high yield market has grown lately, cash position seems solid and a number of new issuers from different sectors have come to the market.

The Norwegian economy is in good shape, the outlook is solid and domestic figures have been roughly in line with Norges Bank’s forecast during the summer. But registered unemployment was somewhat higher than expected and the downward trend in unemployment could be stalling. This is probably not enough to have any major impact on Norges Bank’s view.

The Riksbank kept the repo rate on hold and the rate path unchanged in July. Q2 GDP came in weaker than expected, but the divergence from the Riskbank’s forecast was not very large and the Swedish economy is still strong. However, lower growth and domestic demand, together with easing from other central banks, will probably keep the Riksbank on hold for a while.