April was a positive month for financial markets. Increases in US interest rates paused although we did see moves higher in gilts and European rates. Our securities continued to show their resilience to those moves and once again demonstrated their low sensitivity to interest rates. Spreads within our securities have tightened, but are still significantly wider than pre-Covid-19. As such, we believe that the securities held within our portfolio should benefit from the accommodative stance by central banks, combined with the gradual reopening of European economies. 

Q1 earnings have begun and the results of financials have been strong to date. This is due to the continuation of robust pre-provision income, combined with significantly lower provisions than initially expected, and even provision releases in some cases. As an example, Lloyds Banking Group took an impairment credit of GBP 323 million, meaning that Lloyds had provisioned too much last year for expected credit losses and was therefore able to release a significant amount of those provisions. Moreover, guidance by banks on cost of risk is relatively low. Therefore, from a credit quality standpoint, we believe that financials are in a strong position as they have large amounts of excess capital, combined with strong earnings, low cost of risk and, in several cases, excess provisions for expected credit losses. 

A number of legacy bonds, some of which we held in our funds, were called during the month of April. This has helped the entire market move up. We expect banks to continue cleaning up their legacy securities this year, buying back some of our holdings at premiums to market levels. 

In conclusion, with strong credit quality, valuations which remain more attractive than pre-Covid and a low sensitivity to interest rates, we believe our securities are well positioned to benefit from the current environment.

  • The Valuation date: July 11, 2024
    120,240,709GAM Sustainable Climate Bond fundIE000BSJBO140.00470.0184-0.05320.471.84-5.32
    220,240,709GAM Star Crdt Ops EUR InvIE00B50JD3540.00740.06910.59310.746.9159.31
    320,240,709GAM Star Crdt Ops GBP InvIE00B510J1730.00730.06060.87140.736.0687.14
    420,240,709GAM Star Crdt Ops USD InvIE00B57693100.00710.05950.78640.715.9578.64
    520,240,709GAM Interest Trend IncIE00BYM4P9130.00780.05960.33560.785.9633.56

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