General Market Review
Overall, global equity markets finished December on a positive note. European indices and emerging market equities delivered solid gains. In contrast, the US S&P 500 Index was broadly flat for the month, and the NASDAQ—home to many US technology and growth stocks—declined. It was also a challenging period for developed market government bonds, with both US Treasuries and German Bunds posting modest losses.
As anticipated, the US Federal Reserve lowered interest rates by 25 basis points, bringing the target range to 3.5%–3.75%. This marked the third rate cut in 2025. However, policymakers appear divided on whether to pause further cuts in 2026, at least during the first quarter. Following the Federal Open Market Committee’s cautious communication, the probability of another cut in Q1 now stands at 44%, which would imply an effective rate of 3.5% compared with the current 3.64%.
The US labor market showed only marginal improvement. Non farm payrolls rose by 64k in November, following a decline of -105k in October. Meanwhile, the unemployment rate edged up to 4.6% in November. US consumer price inflation for November eased compared with the previous official reading in September: headline inflation increased by 2.7% year on year, while core inflation (excluding energy and food) rose by 2.6%.
In the Eurozone, November inflation figures were unchanged from the previous month. Headline inflation stood at 2.1%, and core inflation at 2.4%. Yields on US 10 year Treasuries climbed by 16 basis points, from 4.01% to 4.17%, while German 10 year Bund yields rose by 17 basis points, from 2.69% to 2.86%.
The MSCI World Index gained +0.81% in USD terms, and the MSCI Europe Index advanced +2.67% in EUR terms.
Portfolio Management Report
Credit markets finished the year strongly and showed resistance throughout this month. High Yield cash spreads tightened by 11 Bp in the US and 13 Bp in Global High Yield. The weakest segment was Nordic High Yield, where spreads widened slightly by +3 Bp. Synthetic spreads on the 5-year CDX.HY tightened by 6 Bp from 323 Bp to 317 Bp. The total return of US High Yield was +0.65% (Global High Yield: +0.66%). Due to the negative spread returns Nordic High Yield achieved only +0.4%. Part of the weakness reflected the timing of coupon payments that has translated in a slightly lower income return. Anyhow, several issuers also underperformed. Full-year returns ended at +8.4%. Regarding current base rates and spread levels, around 0.7% might be seen as a normal monthly return, although some variation around this level should be expected even if spreads remain unchanged. The share of bonds priced at distressed levels remains low at 4.7%, although this is higher than the 2.5% recorded at the end of 2024. Meanwhile, 61% of bonds trading above par, down from 66% at the end of 2024. US High Yield has rallied for eight straight months in 2025 as tame inflation and steady growth fueled demand for riskier credit. For the full year, the BB-segment marked the strongest performance within the broader US high yield realm with a total return of +8.9% almost 2.5%pt ahead of the riskiest tier of the junk bond market. In December, BB-spreads tightened by 4 Bp, while CCC-spreads tightened by 32 Bp. The current spread (to treasuries) of the broad US High Yield Index is at 281 Bp which is below the one-year average of 305 Bp. The Nordic High Yield primary market activity weakened until the end of the year with 13 deals in total. New issue volumes reached NOK10bn, lifting YTD volumes to around NOK288bn. The issuance was heavily skewed towards NOK- and USD-denominated bonds with a share of around 75%. The average new issue spread was 560 Bp compared to this year’s average of 531 Bp. In sum 90% of overall placements were issued by Nordics, hence primary market in December was dominated by domestic companies. However, the share of repeated issuers was only 38%. Those frequent and well-known issuers paid around 484 Bp on average well below 560 Bp. A volume of around USD0.4bn was solely related to issues in US-Dollar or Euro. Out of that portion, around 47% was issued by transport and energy. Within our core sectors only one relevant company entered the market: HMH Holding. The company has once placed a bond on the Nordic High Yield bond market. HMH is a drilling solutions provider that offers a broad suite of services to the on- and offshore drilling and subsea mining companies. In a nutshell, the company does not own any vessels or drilling rigs but provides equipment, software and services. The issuer is 50% owned by Akastor ASA and 50% owned by Baker Hughes. The net proceeds from the bond issue will be earmarked to repay the existing senior secured bond (USD200mn) maturing in 2026. As the company is redeeming its senior secured notes, same asset collateral is used for the new bond issue. However, there are no fixed assets pledged. The deal was initially announced at low-8% in yield terms but finally priced at 7.875% at the lower end of the. The duration of the senior secured note was 3 years, and the company collected an amount of USD200mn fully covered by books. On the US primary market twenty-seven deals were carried out in December. With a volume of USD22.9bn this was an average month but still was above our expectations. In total it was the busiest full year since 2021 reaching a total volume of USD328bn. Moreover, it was the fourth busiest year on record ranked behind 2012: USD329bn, 2020: USD432bn and 2021: USD458bn. The BB-segment was dominating the supply this year by accounting for more than 52% of total issuance volume. Around 21% was issued by energy and utility companies.
We started the month of December with a low cash position of roughly 1%. Over the course of the month, we increased our exposure to EUR-denominated corporate hybrids. The overall sector allocation did only change slightly: We decreased our allocation to a few oil segments by reducing the exposure to oil producers and Integrateds each by 2%pt. On the other hand, we increased the allocation to (electric) utility companies by around 4%pt. In terms of our strategical buckets, the credit selection has generated around 54% of the total return in line with the average weight during the month of 56%. Our directional bucket underperformed in December by generating only around 14% of the total return at an average weight of 25%. Since there are only around 3% currently allocated to opportunistic situations with a share on the total return of 2%, the residual 30% of total return goes back to net carry having an average weight of 20% in the fund. At the end of the month our allocation to USD-denominated bonds was reduced from 76% to 72%. The effective duration of the fund was slightly higher at 2.3%. We participated in no new issue coming to the primary market. At the end of December, the fund’s ordinary income potential, which includes both bond coupons and coupons from synthetic instruments was lowered to 7.8% as two bonds were called early end of December that were not reinvested accordingly.
For more information, you can find our latest Factsheet – December 2025.
Seahawk Investments GmbH
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