Robeco Euro Government Bonds IHI EUR

Michiel de Bruin is Head of Euro Sovereigns within the Global Macro team and Portfolio Manager. Prior to joining Robeco in 2018, Michiel was Head of Global Rates and Money Markets at BMO Global Asset Management in London. He held various other positions before that, including Head of Euro Government Bonds. Before he joined BMO in 2003, he was, among others, Co-Head of Fixed income Sales and Trading at NIB Financial Markets in Amsterdam. Michiel started his career in the industry in 1986. He is a Certified European Financial Analyst and holds a Bachelor’s in Applied Sciences from University of Applied Sciences in Amsterdam. Stephan van IJzendoorn is Portfolio Manager in Robeco’s Global Macro team. Prior to joining Robeco in 2013, Stephan was employed by F&C Investments as a Portfolio Manager Fixed Income. Before his move to F&C Investments he worked in similar functions at Allianz Global Investors and A&O Services. Stephan started his career in the Investment Industry in 2003. He holds a Bachelor’s in Financial Management, a Master's in Investment Management from VU University Amsterdam and is Certified European Financial Analyst

The fund is established in Luxembourg and is subject to the Luxembourg tax laws and regulations. The fund is not liable to pay any corporation, income, dividend or capital gains tax in Luxembourg. The fund is subject to an annual subscription tax ('tax d'abonnement') in Luxembourg, which amounts to 0.01% of the net asset value of the fund. This tax is included in the net asset value of the fund. The fund can in principle use the Luxembourg treaty network to partially recover any withholding tax on its income.

Investors who are not subject to (exempt from) Dutch corporate-income tax (e.g. pension funds) are not taxed on the achieved result. Investors who are subject to Dutch corporate-income tax can be taxed for the result achieved on their investment in the fund. Dutch bodies that are subject to corporate-income tax are obligated to declare interest and dividend income, as well as capital gains in their tax return. Investors residing outside the Netherlands are subject to their respective national tax regime applying to foreign investment funds. We advise individual investors to consult their financial or tax adviser about the tax consequences of an investment in this fund in their specific circumstances before deciding to invest in the fund.

The fund incorporates sustainability in the investment process via exclusions, negative screening, ESG integration and a minimum average country sustainability ranking score as well as a minimum allocation to ESG-labeled bonds. The fund complies with Robeco's exclusion policy for countries and does not invest in countries where serious violations of human rights or a collapse of the governance structure take place, or if countries are subject to UN, EU or US sanctions. In addition, the fund excludes the 15% worst ranked countries following the World Governance Indicator 'Control of Corruption'. ESG factors of countries are integrated in the bottom-up country analysis. In the portfolio construction the fund ensures a minimum weighted average score of 6.5 following Robeco's proprietary Country Sustainability Ranking. The Country Sustainability Ranking scores countries on a scale from 1 (worst) to 10 (best) based on 40 environmental, social, and governance indicators. Lastly, the fund invests in a minimum of 10% in green, social, sustainable and/or sustainability-linked bonds.

German bond yields closed April at levels similar to March. Nonetheless, bond market volatility remained very high. Front-end German bond yields traded in an approx. 2.5% to 3.0% range. But especially on the last day of the month, bonds rallied strongly, with the 2-year German yield dropping 14 bps to 2.69%. 10-year German yields dropped from 2.46% to 2.31% on that day. Demand for bonds was boosted by lower-than-expected Eurozone GDP growth and German inflation surprising on the downside as well. Even as fears around banking stress seemed to subside, the 2-year BTP-Bund spread widened 15 bps to 62 bps. Spreads widened on supply pressures and expectations that the ECB will increase its QT pace in the summer.

Based on transaction prices, the fund's return was 0.09%. The portfolio outperformed its index in April. The main contributors to the relative performance were duration, curve and country positions. The underweight exposure in Italian and Spanish bonds added to performance, as spreads widened. In addition, the overweight duration position benefited from the huge bond rally on the last day of the month, as yields declined sharply. Curve steepeners added to performance, as expectations for ECB rate hikes were scaled back somewhat, benefiting front-end yields.

While inflation is still elevated, we have seen peak inflation levels in both the US and Europe. In addition, after a year of central bank tightening, it is expected that much higher interest rate levels will increasingly start to bite, limiting the recovery potential of economic growth. We expect that both the Fed and the ECB are coming to the end of their tightening cycles. With inflation in Europe being stickier, as wage rises are still feeding through, the market expects the ECB to hike about 75 bps before pausing its tightening cycle. We are slightly more dovish and believe the ECB could already shift to a wait-and-see stance after delivering 50 bps of hikes. Further out, we believe that ECB policy rates will fall back to neutral levels sooner than markets currently think. Against this background, we continue to gradually scale into duration. As the ECB is expected to further increase (passive) QT by reducing reinvestment from its APP program from July onwards, we remain slightly cautious regarding Italian and Spanish bonds, as valuations are already quite expensive on a relative basis.