Performance

October continued the trend of the enormous spike in long tenor treasury yields with the treasury curve experiencing a “bearish un-inversion”. This was mostly caused by market participants expecting higher long term interest rates. Our fund performance came in at -3.5%* for October. The negative performance was roughly made up out of two factors. Firstly, the market by large declined significantly on the back of an increase in long tenor treasury yields as well as the slight widening in spreads. Out of the -3.5% decline in our fund shares, roughly -1.5% was as a result of the wider decline in emerging market Eurobonds. Secondly, the Administrator began applying a discount to all Russian non-sanctioned bonds to fairly address the low liquidity of these bonds. This discount factor is based on the trades in Russian bonds that the Fund had since autumn, when the liquidity of this sector drastically changed for the worse. This second factor resulted in a -2% negative mark-down of our fund assets. Should the Fund realize trades in Russian Eurobonds, in the future, at a higher price, this would lead to a both positive P&L and a lower discount factor for the future valuation of Russian Eurobonds. Data released for September came in slightly worse than expected. The growth in the US Consumer Price Index [CPI] for September came in at 0.4% MoM and 3.7% YoY, with both numbers coming in higher than expected by 10 basis points. The growth in the Personal Consumption Expenditure Price Index [PCE], the FED’s preferred inflation gauge, came in at 0.4% MoM, and 3.4% YoY. The former number came in also higher than expected by 10 basis points, while the latter came in as expected. The unemployment rate for September came in at 3.8%, higher than the expected 3.7%. Generally, data received for September suggests that the economy remains strong while price growth remains elevated. Derivative markets, as of the end of October, were pricing in a roughly 27.1% chance of an additional rate hike this calendar year. Markets continued to price in rate cuts throughout the entirety of 2024. In October we managed to receive an approval from our custodian to sell Evraz-24 and Sibur-23 bonds, both of which we managed to trade, thus further decreasing the weight of Russian bonds at the Fund. The leverage of our fund decreased to -34.4%. * Net performance, B1 shares.