Stock indexes, which had ended the year near their highs, took a battering and Sovereign yields rose, with the US 10-year printing near to 1.90 and the 10-year Gilt nearly doubling from its December low. Credit spreads had narrowed to start the year near their tights, but revisited their early December wides towards the end of January.

This volatility put a lid on new issuance in the primary market. A few issues did price in Sterling earlier in the month but we avoided all of them and they are now mostly trading wider than reoffer. We did however take some new issue covered bond floating risk from National Australia Bank, paying SONIA +100bp, to maintain our FRN allocation. We took spread profits in several issues, selling Workspace Group 2Q 28’s, NatWest Group 2.05 28’s and some Close Brothers 2 26’s. We also sold some Northumbrian Water 6.875 23’s, a long term position in the fund (which you can tell from the coupon), as they are about to become sub 1-year paper.

The above article has been prepared for investment professionals. Any other readers should note this content does not constitute advice or a solicitation to buy, sell, or hold any investment. We strongly recommend speaking to an investment adviser before taking any action based on the information contained in this article.

Please also note the value of investments and the income you get from them may fall as well as rise, and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.