General Market Review
In February the stock market performance was mixed as US stocks fell whereas European stocks outperformed. As growth concerns came up bond yields fell.
On the geopolitical side, the focus in recent weeks has been on tariffs, as global trade might be facing new trade paradigms. The talks between the President of Ukraine and the President of the USA to negotiate a peace agreement to end the war between Ukraine and Russia were also of great importance. The outcome was unclear at the end of February. Nevertheless, Ukrainian sovereign credit is already pricing in a 60% probability of a lasting ceasefire. In Germany, the centre-right Union party won the country’s federal election putting Friedrich Merz in line to become chancellor at a crucial time for Germany and Europe. With two years of recessions behind the direction of travel is still unclear, but it could be a landmark election. In the US, the labour market was weaker as non-farm payrolls increased by only +143k in January from +156k in December. The unemployment rate was slightly better than consensus at 4.0% in January. In the Eurozone, the unemployment rate remained stable at 6.3%. In the US, consumer price inflation for the month of January was in line with consensus and slightly higher than in the prior month. Headline inflation has increased by +3.0% (y-o-y) whereas core inflation (excluding energy and food) came in slightly above consensus at +3.3% (y-o-y). In the Eurozone, consumer price inflation figures for the month of January came in higher versus the prior month. Headline inflation has increased by +2.5% whereas core-inflation by +2.7% respectively. US 10-year treasury yields have decreased by -33 bp from 4.54% to 4.21%. On the other hand, German 10-year bund yields have decreased by -5 bp from 2.46% to 2.41%.
The MSCI World Index decreased by -0.7% (USD den.) and the MSCI Europe Index rose by +3.6% (EUR den.).
Portfolio Management Report
Sentiment deteriorated in February and the markets became aware of weaker economic growths risks driven by the Trump administration’s efforts for pushing through higher tariffs. As a result, market participants priced in two rate cuts by the FED and around 75% probability of a third rate cut for the residual year. This led to a decline in interest rates, as 5-year US Treasury yields decreased by 32 Bp. This was partly offset by widened credit spreads: US High Yield (+19 Bp) and Global High Yield (+10 Bp). At the end of the month the performance was still positive. Particularly, US High Yield shrugged off rising inflation expectations, a sharp decline in home sales, weakening consumer confidence and repeated assertions by various FED officials that the rates are likely to stay higher for longer. The only segment that was performing positively spread-wise was Nordic High Yield (-6 Bp) as it was linked to the more positive sentiment of the European High Yield market. In general, the Nordic High Yield is near historical lows but should be resilient going forward. The US-High Yield credit default swap market was outperforming cash bond markets by widening only around 9 Bp. Since we were in the blackout period the supply on primary market was muted. Nonetheless, the Nordic High Yield primary market continued to perform well in February with volumes around NOK27bn (USD2.5bn equivalent). A volume of around USD1.6bn equivalent was solely related to issues from US-Dollar- or Euro. Out of that, more than half of the issues was issued from transportation (c.18%) and energy (c.38%) companies. In the energy sector, only one relevant company entered the market: Archer Norge AS – an oil service company – issued USD425mn in a senior secured bond transaction maturing in 2030. The deal was priced at 100 with an attractive yield of 9.5%. Around USD18.0bn was priced on the US primary market, which was 31% lower than February 2024. Those light supply fueled the rally on the secondary market. Only around 10% of total volume was issued from transport, energy and utility companies. Within our focus, there were two companies entering the market: The US-midstream player Hess Midstream was brought to the primary market in a USD800mn deal priced with a coupon of 5.875% maturing in 2028. The use of proceeds was to redeem its outstanding HESM 5.625 2026s notes in the total amount of USD795mn. Another interesting deal was Long Ridge Energy LLC, the project finance entity that owns a 485-megawatt (MW) combined-cycle gas turbine (CCGT) facility in Ohio. This facility is 100% owned and operated by the subsidiary Long Ridge Energy Generation LLC (OpCo). As a first-time issuer, the company had to pay a coupon of 8.75%. It raised USD600mn in a 7-year transaction and used the proceeds to refinance an existing term loan and fund gas well development for the next two years. The transaction also aimed to add around USD39mn of cash to the balance sheet.
In February, we engaged in some bonds from oil service companies operating either in offshore or seismic segment. The effective duration of the fund was held stable after transactions at around 2.1%. Two of our portfolio companies decided to call its bonds early. Hess Midstream fully called its 2026s notes as they earlier raised USD800mn on the primary market. California Resources used its partial call to further reduce its amount on the 2026s notes by USD 123mn to an outstanding amount of USD123mn. The 2026s notes were originally issued in the amount of USD600mn and partially called and/or tendered a few times since issuance. We are currently seeing ample opportunities within our focus sectors. Therefore, we have around 5% of cash to deploy on primary and secondary market in the months to come. We were on the sideline and did not participate in any new issue that came to the primary market.
For more information, you can find our latest Factsheet – February 2025.
Seahawk Investments GmbH
This document is a customer information (“CI”) within the meaning of the German Securities Trading Act (WpHG), the “CI” is directed exclusively to professional clients within the meaning of section 67 WpHG (natural and juristic persons) with habitual residence or registered office in Germany and is used solely for informational purposes. This “CI” cannot replace an individual investment- and investor-friendly advice and does not justify a contract or any other obligation. Furthermore, the contents do not constitute investment advice, an individual investment recommendation, an invitation to subscribe for securities or a declaration of intent or a request to conclude a contract for a transaction in financial instruments. Also, it was not written with the intention of providing legal or tax advice. The tax treatment of transactions depends on the personal circumstances of the respective customer and may be subject to future changes. The individual circumstances of the recipient (including the economic and financial situation) were not taken into account in the preparation of the “CI”. Past performance is not a reliable indicator of future performance. Recommendations and forecasts are non-binding value judgments about future events and may therefore prove to be inaccurate with respect to the future development of a product. The listed information refers exclusively to the time of the creation of this “CI”, a guarantee for timeliness and continued correctness cannot be accepted. An investment in mentioned financial instruments / investment strategy / securities services involves certain product specific risks – e.g. Market or industry risks and risk in currency, default, liquidity, interest rate and credit – and is not suitable for all investors. Therefore, potential prospects should make an investment decision only after a detailed investment advisory session by a registered investment advisor and after consulting all available sources of information. For further information, please refer to the basic information sheet (PRIIPs) and the securities prospectus for free: https://seahawk-investments.com/fonds/. The securities prospectus is provided to you in English and the basic information sheet in German. The above content reflects only the opinions of the author, a change of opinion is possible at any time, without it being published. The present “CI” is protected by copyright, any duplication and commercial use are not permitted. Editor: Seahawk Investments GmbH, Bettinastraße 62, 60325 Frankfurt am Main acts as a tied agent (section 3 (2) German Wertpapierinstitutsgesetz (WpIG)) on behalf of, in the name of, for account and under the liability of the responsible legal entity BN & Partners Capital AG, Steinstrasse 33, 50374 Erftstadt. BN & Partners Capital AG has a corresponding license (section 15 WpIG) from the German Federal Financial Supervisory Authority (BaFin) for the provision of investment advice in accordance with section 2 (2) no. 4 WpIG and investment brokerage according to section 2 (2) no. 3 WpIG.
Foreign Exchange Fluctuations may have a negative impact on performance results.
Please note that the information from Lipper Leaders relates to the previous month. All rights reserved. Lipper Leaders – © 2024 Lipper Lipper Leaders Ranking Criteria – Ratings from 1 (low) to 5 (high) First Number = Total Return; Second Number = Consistent Return; Third Number = Preservation; Fourth Number = Expense