Investment Grade spreads saw a strong rally over the month and, in some areas, it was hard to source paper as dealer inventory was taken up and they were unwilling to go short. The primary market remained in overdrive and new issuance volumes continue to break records, especially in USD, as corporates seek to shore up balance sheets and term out funding at low yields.

CHIG continued to sell down some of its highest rated covered paper to fund other purchases. Liquidity is good in this area of credit and the Fund sold short-dated issues from ABN, Barclays, Nationwide and Santander. We also participated in the Lloyds tender.

Further out on the curve, the Fund added to several existing holdings in the secondary market, notably some T2 Hybrid issues from Rothesay Life, Aviva and M&G. We were very active in the GBP new issue market and took over a dozen new issues across the curve. Down the shorter end we took 3-year risk from Siemens and also some medium 8-year and 15-year risk from GSK. Several utilities came to market down the longer end, such as United Utilities, Southern Water Services and Severn Trent, and have helped to move the duration of the fund out to around 4.5.

Most new issues have performed strongly in the secondary market having attracted substantial books. In particular, two recent issues that we participated in from Pearson and a Direct Line Group T2 have tightened by 75 basis points and 50 basis points respectively, in a matter of days.