Performance

April has turned out to be the worst month year-to-today for many markets. Treasury yields grew materially across the entire yield curve as market participants began to price in lower probabilities of rate cuts this year on the back of higher-than-expected inflation prints. Futures markets, as of the end of April, priced in roughly 28 basis points of rate cuts this year. This is less than half of the previously priced in number of 67 basis points from our last month’s one-pager report. Our fund posted a performance of -1.7%* over the period of April, being dragged down by the higher duration part of the portfolio, while Turkish bonds, on the other hand, were among the best-performers. Data released in April came in mostly worse than expected. The growth in the US Consumer Price Index [CPI] for March came in at 0.4% MoM and 3.5% YoY, with both numbers coming in 10 basis points higher than expected. The growth in the Personal Consumption Expenditure Price Index [PCE], the FED’s preferred inflation gauge, came in at 0.3% MoM, and 2.7% YoY for the same period of March. The former number came in as expected, while the latter number came in 10 basis points higher than expected. The unemployment rate for March came in at 3.8%, as expected. The considerable slowdown, if not a reversal, of disinflation in the US is a worrying trend which may in turn lead to the continuation in the increase of treasury yields. We expect significant volatility in treasury yields and inflation expectations to continue. Throughout April, we maintained a stand-by mode and preferred to refrain from any actions while the market experienced a correction. We took part in one tender offer and there was a small redemption, however, apart from that, the portfolio didn’t change. We ended the month with a small position in cash and plan to keep cash within the range of 0%-5%. * Net performance, B1 shares.