Monthly report March 2021 – HYOF

Like February, March has been characterized by high activity in the Nordic primary market for high yield bonds. Probably partly an effect of increased transaction volumes in Nordic M&A and partly pent-up need for refinancing.

We made 2 investments in the secondary market during March, these were in illiquid bonds issued by 2 major financial companies. Since the bonds are illiquid, they trade with a relatively large bid/ask spread, which gave us a mark-to-market effect over the end of the month and dragged the return for the month to +0.29. We are now back at a positive NAV for the year of 100.09 and the underlying portfolio currently has a yield to maturity of approximately 8% per year.

More and more people are starting to see increased inflation in the US as a result of fiscal policy measures under Biden and better macroeconomic statistics. This is also driving expectations of increased inflation in Europe and the Nordics. The price development of European high-yield bonds (iTraxx Europe Crossover) is relatively flat in the first quarter of 2021, and remains at lower levels than before the market reactions to the pandemic in March 2020.

We continue to see many interesting opportunities in the bond market. We are opening up for monthly issues in HYOF in 2021. The next issue is on April 29 and you can subscribe as usual through Avanza, among others.