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.

Government bond markets had a strong start of the year, with the vast majority of markets showing returns of 2% or more. The strongest European figures were posted in Italy (2.8%), as BTPs traded in line with Bunds, but with a higher beta, over the month. The strong returns were driven by more favorable inflation figures, mainly reflecting lower energy price inflation. This creates room for some central banks, such as the Fed, to sound less hawkish on upcoming policy steps. The BoJ has been lagging other central banks in tightening monetary policy, but took a first step in December by widening the yield curve control band. Euro periphery markets benefited from the broader, more constructive mood towards risk, which in Europe was also due to easing recession concerns.

Based on transaction prices, the fund's return was -2.80%. The fund posted a positive absolute return in January and outperformed its index slightly. Especially the 10s30s curve steepener position in swaps added to performance, as long-dated maturities lagged the broader market now the end of the tightening cycle is getting nearer. Duration positioning was neutral. The significant below index exposure in France, Italy and Spain nonetheless detracted. Positive risk sentiment supported country spreads, which subsequently tightened.

Bond markets had a flying start to 2023 as inflation seemed to have peaked while the economy is slowing down. Nonetheless, the ECB will remain in tightening mode in the next few months. Our central scenario sees a further 75 bps of hikes in the depo rate by June, to 3.25%. We are concerned though that a worse-than-expected economic and market backdrop will prevent the ECB from going above that. Certainly if it, as we assume, will continue to reduce its bond holdings under the APP after Q2. Further out, we suspect that the depo rate will return to 2% sooner than markets currently anticipate. If our macroeconomic and policy outlook proves to be correct, there should soon be more clarity on the level at which policy rates will peak this cycle. This should imply a more favorable environment for long duration positions as well as a prompt re-steepening of yield curves.