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General Market Review<\/span>\u00a0<\/strong><\/p>\n <\/strong><\/p>\n The implied volatility \u2013 whether in interest rates or credit spreads \u2013 is declining for three consecutive months after the major blow-off in April that shook global markets. In terms of interest rate volatility, we are back on a level before central banks around the globe began to enter the hiking cycle in early 2022, and a level that is only slightly higher than the average we have seen in the time between GFC and the outbreak of COVID-19 in March 2020. Therefore, we have seen a clear direction in July for risk markets and credit markets reflected that tone. High Yield performed well as spreads tightened by 10 Bp in the US and 21 Bp in Global High Yield. On the Nordic High Yield market credit spreads widened slightly by 4 Bp and synthetic spreads on the 5-year CDX.HY widened by 3 Bp either. In July the total return for the US High Yield market was +0.4% (Global High Yield: +0.76%) and for Nordic High Yield +0.7%. Thus, the performance was mainly driven by the high carry of the bonds rather than spread changes and remains a key driver in the Nordic High Yield market. We did not get the impression that there was huge activity on the secondary market as most of the market participants are currently in summer break. We expect trading activity to pick up again slowly in August, and we still believe the conditions are in place for further spread compression into the months to come. Only one segment delivered outstanding results in July: the rally in the fixed income realm was propelled by the riskiest CCC-segment that gained around +1.39% in July \u2013 marking the best performance across the whole of the US fixed income segments \u2013 whereas the BB-segment generated only about +0.17%. Nevertheless, the macro picture of rising consumer confidence, robust corporate earnings and higher-than expected GDP boosted risk assets and was the key driver behind the performance.<\/p>\n The total amount of US-american distressed bonds and loans \u2013 defined as trading below 60% \u2013 dropped to USD166.9bn (global distressed stood at USD517bn) in the week ended July 25, according to Bloomberg News. That\u2019s the lowest level since March 30.<\/p>\n The activity on the Nordic High Yield primary market was muted in July due to the summer break in the Nordics. A total of six deals were consummated amounting to NOK4.3bn, and issuance for 2025 has reached NOK153bn. A volume of around USD350mn equivalent was solely related to issues from US-Dollar- or Euro (85% of total volume for the month). Out of that, around 36% was issued from the energy, transport or utility sector.<\/p>\n Within our core sectors only one relevant company entered the market: Performance Shipping Inc, a pure play crude oil tanker operator with focus on the mid-size tanker segment (Aframax and LR1\/LR2). The company was a spin-off from Diana Shipping and transitioned from a containership owner to a dedicated tanker operator by 2020. Performance was a debut issuer on the Nordic High Yield market and collected USD100mn in a senior secured bond transaction maturing in 2029. The deal was priced with an original issue discount (OID) at 97% having a yield of 11.1% and a coupon of 9.875%. The deal was fully covered by books and attractively priced as final terms implied a pickup of 1% in total yield compared to initial price talk (IPT) three weeks earlier. The deal back then was postponed and a few characteristics needed to be amended. The most important covenants that changed in favour of the bondholder: i) collateral was amended from general assets to specific assets namely a pledge on the two unencumbered vessels P. Sophia and P. Monterey (asset value of around USD70mn), ii) restrictions on use of proceeds as they were earmarked (in an escrow account) only for financing\/refinancing of tanker vessels. A restriction on asset sales whenever those two vessels used as collateral are going to be sold the proceeds must be allocated to the escrow account and the funds therein will be blocked until they are deployed to finance any new vessels or to redeem the bonds at 101%. Finally, iii) stricter financial covenants like increasing minimum liquidity from USD10mn to USD20mn and decreasing maximum debt from 65% to 60%.<\/p>\n The issuance was absorbed well by the market and the bond traded around 99% at the end of July. On the US primary market more than forty deals were carried out in July. With around USD35bn, July was the second busiest month for new bond sales since September 2021 right behind June. Moreover, it was the strongest run in four years with three straight months of issue volumes above USD30bn. We expect the volume to maintain on a high level within the next months. In July there was no relevant company for us that came to the market as only 1% of the total deal volume was issued from the energy, transport or utility sector.<\/p>\n We started the month of July by maintaining a low cash position and an investment quota of 110%. We were quite active on the secondary market and increased risk exposure in the automotive segment by switching from short-dated to longer-dated bonds. Apart from that, OKEA AS decided to call its 2026s notes at a price of 104.563% on July 1. Additionally, we participated in the new Performance Shipping deal that was brought to the Nordic High Yield market on July 2. The effective duration of the fund was slightly lower than in the prior month at 2.3% by reducing it effectively through selling 2-year treasury futures. At the end of July, the fund’s ordinary income potential, which includes both bond coupons and coupons from synthetic instruments was held stable at 8.2%.<\/p>\n <\/strong><\/p>\n Portfolio Management Report<\/strong><\/p>\n <\/strong><\/p>\n Sentiment was strong in July and marked a pivotal uptick as markets rallied on trade deal optimism. There were a few positive earnings surprises from banks, technology and retail companies that helped to fuel the performance. On July 27, the US and the EU announced a new trade agreement imposing a 15% tariff on most EU goods coming into the US. The EU pledged to import USD750bn in LNG over the next three years (USD250bn p.a.) and USD600bn in US investments. Moreover, the EU committed themselves to buy \u201chundreds of billions\u201d of US-dollars in US military equipment. Since NATO members are already ramping up defense spending and funneling this almost entirely into US-systems like F35s and Patriot batteries, this could be a strategic lock-in for the years to come. On a first note, this deal reduces trade uncertainty and was therefore seen as a positive sign for global risk markets. Hence, equity markets saw record highs with tech leading the rally and S&P500 closing at 2.2%.<\/p>\n On the macroeconomic realm, the IMF revised its 2025 and 2026 global growth forecast slightly to 3.0% (April: 2.8%) and 3.1% (April: 3.0%) due to lower effective tariff rates, better financial conditions and fiscal expansion in some major jurisdictions. On the other hand, the IMF warned that trade policy uncertainty and elevated tariffs could drag growth longer-term. The Federal Reserve held its policy rate unchanged at 4.25% (lower bound) to 4.5% (upper bound) and FED-chair Powell dimmed expectations for an interest-rate cut in September citing a still strong labor market and above-target inflation.<\/p>\n Across the pond the ECB kept its deposit rate at 2% halting its easing cycle after seven rate cuts that began roughly one year ago in June 2024 with a key interest rate of 4%. In the US, the labour market was slightly better as non-farm payrolls increased by +147k in June from +139k in May.<\/p>\n The unemployment rate was lower at 4.1% in June. In the Eurozone, the unemployment rate was higher at 6.3%. In the US, consumer price inflation for the month of June was higher than in the prior month. Headline inflation has increased by +2.7% (y-o-y) and core inflation (excluding energy and food) came in at +2.9% (y-o-y). In the Eurozone, consumer price inflation figures for the month of June were unchanged versus the prior month.<\/p>\n Headline inflation has increased by +2.0% and core-inflation has increased by +2.3% again. US 10-year treasury yields increased by 14 Bp from 4.23% to 4.37%. whereas German 10-year bund yields have increased by 9 Bp from 2.61% to 2.70%. The MSCI World Index increased by +1.29% (USD den.) and the MSCI Europe Index rose by +0.73% (EUR den.).<\/p>\n