Robeco Euro Government Bonds Z EUR

Michiel de Bruin is Head of Global Macro 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, Head of Fixed Income Trading at Deutsche Bank in Amsterdam. Michiel started his career in the industry in 1986. He holds a post graduate diploma investment analyses from the VU University in Amsterdam and is a Certified EFFAS Analyst (CEFA) charterholder. He holds a Bachelor’s in Applied Sciences from University of Applied Sciences in Amsterdam. Stephan van IJzendoorn is Portfolio Manager and member of Robeco’s Global Macro team. Prior to joining Robeco in 2013, Stephan was employed by F&C Investments as a Portfolio Manager Fixed Income and worked in similar functions at Allianz Global Investors and A&O Services prior to that. 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 (CEFA) Charterholder.

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.For more information please visit the sustainability-related disclosures.The index used for all sustainability visuals is based on Bloomberg Euro Aggregate: Treasury.

Government bond market returns were predominantly negative in May. The 10-year US Treasury yield rose by 24 basis points to 4.40%, while the 30-year yield briefly exceeded 5%. Yields on 10-year German government bonds increased more modestly, by 6 basis points to 2.49%. The US House passed a tax-and-spending bill projected to add USD 3.8 trillion to the federal deficit, which now awaits Senate consideration. Moody's downgraded the US government's credit rating from AAA to AA1, becoming the last of the three major rating agencies to do so. In the Eurozone, the ReArm Europe plan was approved, making EUR 150 billion in loans available, backed by the EU's shared budget. Risk assets performed strongly in May, helping Italian 10-year government bond spreads over German Bunds tighten by 14 basis points to a year-to-date low of 98 basis points. The Fed left policy rates unchanged at its May FOMC meeting, as expected. Chair Powell reiterated that the Fed "doesn't need to be in a hurry" to adjust policy and is awaiting greater clarity.

Based on transaction prices, the fund's return was 0.40%. The fund posted a small positive return and outperformed its index (gross of fees). Duration contributed neutrally to performance, while the curve steepener position added significantly, benefiting from the continued steepening trend. Positive risk sentiment supported performance, with overweight positions in Greece and Spain, as well as allocations to Central European countries (Bulgaria and Hungary), contributing positively as spreads tightened. SSA bond allocations also added value, supported by the constructive risk environment.

It is becoming clear that US trade tariffs are here to stay, as evidenced by the newly announced US-UK trade deal, which maintains a general 10% tariff rate on most goods. Tariffs are a negative shock to growth and increase US inflation, at least as a one-off rise, putting the Fed in a difficult situation. At the same time, the US fiscal position is unlikely to improve. The federal budget deficit is projected to remain high, in the order of 6-8% of GDP, with limited political appetite for fiscal consolidation. We view the premium for holding longer-duration treasuries as too low and envisage a steeper curve. Similarly, we expect the German yield curve to steepen on higher upcoming issuance in Europe. We remain cautious on France, as political tensions are bound to return. In May, the IMF warned that without further measures, the government's deficit could remain near 6% of GDP in the medium term. We are more constructive on Italian bonds currently.