Handelsbanken Räntestrategi Plus (A10 SEK)

Fund performance was positive during Q3 and the fund rose just over 3% in SEK. Global rates fell sharply in the period. After a calm start to the quarter, concerns about a recession increased at the beginning of August as a result of weak economic data from the US labor market in particular. This led the market to expect sharp cuts to key rates. Although the downturn in risk assets rebounded rapidly, the fixed income market continued to price in a high risk for a recession. The central banks reacted by cutting key rates across a broad front. The Riksbank, which began its cycle of rate cuts already in Q2, followed this up with two additional cuts. The European Central Bank followed up its rate cut in June with a further cut in September, while the US central bank (Fed) began its cycle of rate cuts by lowering rates by 50 bps in September.

Our baseline scenario during the year has been that there was a high risk for a recession and that we will be facing a weaker labor market. The fund has therefore been positioned for lower interest rates and steeper yield curves with durations between two and ten years, which was favorable for fund returns during the quarter. Our assessment is that Sweden is slightly ahead in the cycle and has bottomed out. The fund is strategically positioned to benefit from a higher 5-year rate in Sweden relative to Germany, which also contributed positively to returns. The fund’s positions in corporate bonds also contributed positively to returns due to a stable credit market. We also believe that emerging market bonds will benefit from lower US interest rates and have increased the exposure to almost 11%. Emerging markets contributed positively to returns during the period.