Monthly comment

 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.

  • Please read this important legal information before proceeding.

    Information contained herein are solely for the use of the person who has accessed this information and may not be reproduced or distributed, even partially, to any other person or entity.

    The material contained herein is confidential and intended solely for the use of the persons or entities with nationality of or respectively with their residence, domicile, registered office or effective administration in a State or Country in which distribution, publication, making available or use of the information is not contrary to applicable laws or any other regulation.

    The material contained herein is aimed at sophisticated, professional, eligible, institutional and/or qualified investors/intermediaries who have the knowledge and financial sophistication to understand and bear the risks associated with the investments described.

    The information is solely product-related and does not take into account any personal circumstances and does not qualify as general or personal investment recommendation or advice. In particular, the information is given by way of information only and does not constitute a specific legal offer for the purchase or sale of financial instruments. Moreover, nothing contained herein is constitutive of any tax advice.

    Every effort has been made to ensure the accuracy of the financial information herein but the information contained herein has not been independently reviewed or verified. Therefore, Atlanticomnium SA gives no assurance, express or implied, as to whether such information is accurate, true or complete and no responsibility is accepted by Atlanticomnium SA for any errors or omissions. Third-party content is the property of its respective provider or its licensor and is protected by applicable copyright law.

    Past performance is not indicative of future performance. The price of shares/units and the income from the funds/trusts can go down as well as up and may be affected by changes in rates of exchange or financial markets fluctuation, out of the scope of Atlanticomnium SA.

    To the fullest extent permitted by law, in no event shall Atlanticomnium SA or our affiliates, or any of our directors, employees, contractors, service providers or agents have any liability whatsoever to any person for any direct or indirect loss, liability, cost, claim, expense or damage of any kind, whether in contract or in tort, including negligence, or otherwise, arising out of or related to the use of the information provided.