The All Bond Index returned -1.6% for the month while the BESA Barclays Inflation-Linked Bond Index was flat. The STeFI Call Deposit Index increased 0.4%, while CPI increased 0.4% month-on-month to the end of August.

The US economy continued its recovery from the first half of the year. The US unemployment rate fell to 6.1% in August from 6.2% in July. Consumer confidence in the US dipped slightly as job creation and home sales reduced. In the UK, growth continued; as retail sales increased, the unemployment rate dropped more than expected and house prices rose. In contrast, growth in the Eurozone remains weak. Germany continues to deal with the impact on trade and confidence in the region due to the Ukraine conflict and the sanctions against Russia. Manufacturing conditions in the Eurozone have been deteriorating over the last three months. The recovery in global growth remains varied across developing and developed countries.

Locally, as expected, the Monetary Policy Committee left the interest rate unchanged. The decision to keep the repo rate unchanged was influenced by the downward revision in the SARB's GDP growth forecast and better than expected inflation data. The market is pricing in at least a 50 basis point increase in interest rates by the end of next year. SA Reserve Bank Governor, Gill Marcus announced that she will be stepping down from her position.

Growth in Private Sector Credit Extension (PSCE) slowed to 8.8% year-on-year from 9.8% the previous month. The biggest contributor to the change was loans to companies, where growth slowed to 15.1% from 17% the previous month. The gradual slowdown in loans to households continued, reducing to 3.6% from 4.1%. Vehicle sales increased by 11.5% yearon- year from -1.4% the previous month and money supply growth dropped from 6.9% year-on-year the previous month to 6.4%.

Domestic issuers of fixed income assets are coming under pressure, with auctions clearing at or above indicated spreads over Jibar - a phenomenon that has not been seen in the market for the last while. We expect further spread widening in the coming months.

The aim of the Nedgroup Investments Core Bond Fund is to produce superior risk adjusted returns relative to the peers. Studies have shown that that there is very little persistence skill in the timing duration bets and consequently the ability to outperform on a consistent basis. The approach of this Fund is to attempt to outperform peers through the following:

- staying largely neutral on modified duration;
- lower fees;
- a low turnover approach;
- prudent and timeous exposure to credit to enhance returns; and
- optimal portfolio construction to select stock exposures.

To achieve this goal the Fund has largely reduced its relative negative duration position, although its position is still net short the All Bond Index. The Fund weighs the risk of adverse capital movements relative to the attractiveness of yields offered on the long end of the curve and to this end has increased its exposure in this area in order to reduce its relative risk.

The yield on the Nedgroup Investments Core Bond Fund as at 30 September 2014 was 8.5%.

The FTSE/JSE All Share index returned 2.77% for the month ending 30 June 2014, driven by stronger Industrials (2.58%), Financials (2.40%) and Resources (3.45%). Resources, Industrials and Financials comprised 28%, 52% & 20% respectively of the FTSE JSE All Share free float index (at the beginning of the month). The rand weakened against all of the major currencies: 2.7% against the British pound to R18.17 and 1.0% against the Euro to R14.55 and 0.6% against the US dollar to R10.63. The Commodity Index (CRB) was up 0.9% in dollar terms. The dollar gold price gained 6.09% and oil prices gained 2.78%, trading around $113 per barrel.

The All Bond Index returned 0.95% for the month while the BESA Barclays Inflation-Linked Bond Index performed strongly with a return of 1.39%. The STeFI Call Deposit Index increased 0.40%, while CPI increased 0.2% m-o-m to the end of May.

The first quarter US growth numbers came out much weaker than initial estimates suggested. GDP was estimated to have contracted by 2.9% quarter-on-quarter; most of the decline was attributed to the abysmal weather during the quarter, which disrupted output and ran down inventories. However, some momentum has returned. This was evident from increased retail sales, house prices which rose more than expected and a steady unemployment rate of 6.3%. News in the UK remains positive, manufacturing PMI remained above the key 50 level and unemployment rate fell to 6.6% in April, its lowest level since January 2009.

Locally, the longest strike in South Africa's 130 years of mining history is finally over, but the impact of the strike will be felt for some time to come. It is estimated that companies lost R24bn and workers sacrificed R10.7bn in earnings. Fitch lowered South Africa's outlook to negative from stable, the main reasons were:

- Weak GDP figures;
- Rising public indebtedness; and
- Failure to narrow the current account deficit.

S&P also downgraded both SA's foreign currency credit rating by one notch from BBB to BBB- (with a stable outlook) and the local currency rating from A- to BBB+.

CPI rose to 6.6% year-on-year from 6.1% the previous month, well above the SARB's 6% limit. The increases in CPI were led by higher food prices. For the third consecutive month, core inflation remained unchanged at 5.5% year-on-year. The major risk to inflation in South Africa is the rand and the rising oil price. In contrast to market expectations for an increase to 9%, South Africa's PPI slowed to 8.7% from 8.8% year-on-year.

Money supply was higher in May at 7.6% year-on-year compared to the previous month of 7.0%. Private sector credit extension remained unchanged at 8.3% year-on-year. Household credit growth decreased for the second consecutive month to 4.3% year-on-year from 4.6% the previous month. The slowdown in household credit extension is due to the stricter credit criteria used by lenders as bad debts have increased. However, lending to corporates increased to 13% from 12.5% year-on-year.

Although the infamous 5-month platinum strike is over, there is a threat that strikes in other industries may occur. NUMSA has already declared that strike action will begin in July. The downgrade and negative outlooks from S&P and Fitch may affect foreign flows into South Africa. The SARB has continued with its hawkish tone, emphasizing that interest rates will have to increase to help contain high inflation.

The aim of the Nedgroup Investments Core Bond Fund is to produce superior risk adjusted returns relative to the peers. Studies have shown that that there is very little persistence skill in the timing duration bets and consequently the ability to outperform on a consistent basis. The approach of this fund is to attempt to outperform peers through the following:

- Staying largely neutral on modified duration
- Lower fees
- A low turnover approach
- Prudent and timeous exposure to credit to enhance returns
- Optimal portfolio construction to select stock exposures

To achieve this goal the Nedgroup Investments Core Bond Fund has largely reduced its relative negative duration position, although its position is still net short the All Bond Index. The Fund weighs the risk of adverse capital movements relative to the attractiveness of yields offered on the long end of the curve and to this end has increased its exposure in this area in order to reduce its relative risk.

The Nedgroup Investments Bond Fund will change it's name to Nedgroup Investments Core Bond Fund, effective from 30 April 2014

The FTSE/JSE All Share index returned 1.83% for the month ending 31 March 2014: driven primarily by stronger Industrials (1.25%) and Financials (6.29%), while Resources were flat for the month. Resources, Industrials and Financials comprised 30%, 51% & 19% respectively of the FTSE JSE All Share free float index (at the beginning of the month). The rand strengthened 2.1% against the US Dollar to R10.53, 2.2% against the euro to R14.51 and 2.4% against the British Pound to R17.56. The Commodity Index (CRB) was up 0.7% in dollar terms. The dollar gold price lost 3.16% and oil prices lost 1.1% trading at around $108 per barrel.

The All Bond Index returned 1.8% for the month while the BESA Barclays Inflation-Linked Bond Index performed strongly with a return of 2.7%. The STeFI Call Deposit Index increased 0.5%, while CPI increased 1.1% month-on-month to the end of February.

The US economy continues to recover from a cold winter, which affected spending, production and trade. Consumer confidence in the US picked up strongly in March, reaching its highest level since January 2008. In Europe, the region's PMI stayed well above the 50 level in March. Confidence dipped in Germany, however, due to fears of a possible increase in conflict between the West and Russia over Ukraine. In South Africa, heavy rainfall in March unsettled production at many coal mines and resulted in power outages and restrictions, as a result mining production declined sharply. The SARB opted to keep the repo rate unchanged at 5.5%. Governor Gill Marcus hinted at further rate hikes in the near future. The decision to keep the repo interest rate unchanged seems to have been influenced by the rand's recent strength. Overall, the expectation for global interest rates is for increases with local interest rates being no exception.

CPI inflation edged up to 5.9% year-on-year from 5.8% in the previous month. This was in line with market expectations with further increases forecast. The reasons for the upward movement were the transport, housing, goods and services as well as food and non-alcoholic beverage categories. For the sixth successive month, core inflation remained controlled at 5.3% year-on-year. PPI inflation increased to 7.7% year-on-year from 7% beating the consensus forecasts of 7.2%.
Money supply decreased from 6.4% to 5.9% year-on-year. PSCE increased to 8.7% year-on-year from 8.2%. An uptick in the corporate growth was mostly the reason for increase in the PCSE, which rose to 12.6% year-on-year from 11.1% the previous month. Household credit slowed to 5.2% year-on-year from 5.6% the previous month. A contraction in vehicle sales is also expected to slow down household credit growth.

The US Federal Reserve announced that tapering will continue, monthly asset purchases have been dropped by another US$10 billion in March. Improved growth numbers in the US and the Eurozone will provide support for future interest rate increases. The effects of the strike in the South African mining industry will be felt in the next few months, but the economic circumstances are still expected to improve later in the year. If there are no further major strikes or interruptions in power supply, stronger global demand and the weaker rand should increase production and exports. Better local growth figures will make further monetary policy tightening by the SARB more likely.
The aim of the Nedgroup Investments Bond Fund is to produce superior risk adjusted returns relative to the peers. Studies have shown that there is very little persistent skill in the timing of duration bets and consequently the ability to outperform on a consistent basis. The approach of this Fund is to attempt to outperform peers through the following:

- Staying largely neutral on modified duration
- Lower fees
- A low turnover approach
- Prudent and timeous exposure to credit to enhance returns
- Optimal portfolio construction to select stock exposures

To achieve this goal the Nedgroup Investments Bond Fund has largely reduced its relative negative duration position, although its position is still net short the All Bond Index. The Fund weighs the risk of adverse capital movements relative to the attractiveness of yields offered on the long end of the curve and to this end has increased its exposure in this area in order to reduce its relative risk.

Taquanta Asset Management

The FTSE/JSE All Share index returned 2.98% for the month ending 31 Dec 2013. Resources returned 1.7%, Industrials 3.8% and Financials 2.4%. Resources, Industrials and Financials comprised 29%, 52% and 19% respectively of the FTSE JSE All Share free float index (at the beginning of the month). The rand depreciated 2.0% against the US dollar to R10.35, 4.3% against the euro to R14.42 and 4.3% against the British pound to R17.35. The Commodity Index (CRB) was up 1.9% in dollar terms. The dollar gold price was down 3.8% and oil prices were flat trading around $110 per barrel.

The All Bond Index returned 1.1% for the month while the BESA Barclays Inflation-Linked Bond Index returned 1.06%.The STeFI Call Deposit Index returned 0.4%, while CPI increased 0.1% m-o-m to the end of November.

Global equity markets continued their positive trend in 2013 in spite of nervous investor sentiment that rising equity prices may advance equity markets deeper into bubble territory. Financial markets also began pricing in the unwinding of the US bond stimulation program and emerging markets experienced significant decreases in capital flows as a result. Overall, economic growth in the developed nations was encouraging in the year and despite bailout fears the Eurozone is still holding itself together. Local growth figures for South Africa were disappointing, however, and far from the 7% growth rate targeted by the National Development Plan. Although there is increased focus by National Treasury on efficient fund allocation, local metrics such as the upwardly revised fiscal deficit, the current account deficit, low GDP growth, increased labour unrest and rand volatility over the year are a cause for concern.

CPI inflation is now well within the 3-6% SARB target after breaching the band for a few months. Although CPI came in lower than expected at 5.3% y-o-y in November, inflation figures are expected to increase going forward from this cyclical low. PPI also printed lower than expected at 5.8% y-o-y from 6.3%. Moderating inflation figures support the view of unchanged rates in the beginning of 2014 however there are notable upside risks to this outlook particularly from food prices.

Money supply was lower in November at 6.3% y-o-y compared to the previous month. PSCE also printed lower at 7.0% y-o-y. Both figures peaked in May 2013 and have been on a declining trend since. Credit figures for households have been showing a slowing trend over the year and these figures support the view of muted consumer demand. Consumer confidence was weak over 2013 compared to 2010 and 2011 and demand pressures are likely to be contained as we head into 2014.

The global sentiment is for more robust growth figures in the major markets in 2014. There is ample risk in this outlook however from Eurozone sovereign debt levels and the timing to the end of the Fed's stimulus program. Locally, the SARB maintained the Repo rate at 5% over the year and is expected to hold it at this level in the first quarter of 2014 at the least. Market expectation (reflected in the FRA market) is for rising interest rates in the short to medium term while risks for local inflation and currency movements are to the upside

The aim of the Nedgroup Investments Bond Fund is to produce superior risk adjusted returns relative to the peers. Studies have shown that there is very little persistent skill in the timing of duration bets and consequently the ability to outperform on a consistent basis. The approach of this Fund is to attempt to outperform peers through the following:

- Staying largely neutral on modified duration
- Lower fees
- A low turnover approach
- Prudent and timeous exposure to credit to enhance returns
- Optimal portfolio construction to select stock exposures

To achieve this goal the Nedgroup Investments Bond Fund has largely reduced its relative negative duration position, although its position is still net short the All Bond Index. The Fund weighs the risk of adverse capital movements relative to the attractiveness of yields offered on the long end of the curve and to this end has increased its exposure in this area in order to reduce its relative risk.

During December the Fund marginally outperformed relative to the peers in the sector.

The FTSE JSE All Share Index increased by 5.1% in September. This was driven by Resources (1.9%), Industrials (6.3%) and Financials (6.3%). Resources, Industrials and Financials comprised 31%, 50% and 19% respectively of the FTSE JSE All Share free float index at the beginning of the month. The Rand strengthened against the Dollar (2.4% to R10.03) and the Euro (0.3% to R13.55), but weakened against the British Pound (2.1% to R16.24). The Commodity Index (CRB) gained 2.5% in Dollar terms. The Dollar gold price decreased 4.8% and the Dollar oil price decreased 4.8% to around $108 per barrel.

The All Bond Index gained 3.9% for the month and the BESA Barclays Inflation-Linked Bond Index gained 2.9% as yields continued to increase to more historically normal levels. The STeFI Call Deposit Index returned 0.4%. CPI increased 0.3% m-o-m to the end of August.

The US remains central to the risk concerns of the global market and political participants. While the tapering of the US bond buying program appears to have been placed on hold temporarily, the concern is now on the possibility of default by the US government if the debt ceiling is not raised by mid-October. The implications, if the political impasse is not breached, include a possible downgrade of the US credit rating and with it higher interest rates on borrowings. Higher rates would disrupt the accommodative stance of the US Federal Reserve aimed at encouraging growth; and poor growth figures in the US would have ramifications on global growth.

Locally, the South African Reserve Bank governor mentioned the US situation and reiterated concerns over domestic growth and the deteriorating inflation outlook. The SARB inflation trajectory implies an eventual return of inflation rate back into the target band. The SARB GDP forecast for 2013 is 2%.

The CPI inflation figures came in at 6.4% y-o-y, higher than the previous month but in line with expectations. The acceleration was due to higher food and transport prices. Core inflation, however, was lower at 5.1% from 5.2% y-o-y last month. PPI surprised to the upside, printing at 6.7%, while the consensus expected a decrease from last month's figure of 6.6%. Inflation is expected to peak at this month's figure and decrease over the coming months to under 6%. There is significant risk to this outlook from recent rand weakness and higher labour and input costs. The subdued core inflation figure lends weight to the view of weak demand pressures on inflation and supports the MPC decision to keep the repo rate unchanged.

Money supply continued its decreasing trend to 6.9% y-o-y from 7.4% last month. PSCE however bucked its decreasing trend (since May) and came in higher than consensus expectations at 8.2% y-o-y. The increase in PSCE figures was mainly supported by credit extension to corporates which jumped to 10.1% y-o-y from 8.6% the previous month. Household credit extension continues to moderate and will likely feed into subdued consumer demand figures. Though the increase in corporate credit is encouraging, it is still early to view this as an indicator of an improving economy. The recent credit figures support the current accommodative monetary policy stance of the SARB.

We expect interest rates to be flat for the remainder of the year. The focus in the upcoming month will be the politics surrounding the raising of the debt ceiling in the US, in addition to the continuing debt issues in the Eurozone. In the domestic market, the SARB maintained the repo rate at 5% - as expected - but emphasised the risk to the inflation and economic growth forecasts. The current market data supports the accommodative stance of the MPC and we do not expect a change in interest rates for the remainder of the year.

The aim of the Nedgroup Investments Bond Fund is to produce superior risk adjusted returns relative to the peers. Studies have shown that that there is very little persistent skill in the timing of duration bets and consequently the ability to outperform on a consistent basis. The approach of this Fund is to attempt to outperform peers through the following:

¥Staying largely neutral on modified duration

¥Lower fees

¥A low turnover approach

¥Prudent and timeous exposure to credit to enhance returns

¥Optimal portfolio construction to select stock exposures

To achieve this goal the Fund has largely reduced its relative negative duration position, although its position is still net short the All Bond Index. The Fund weighs the risk of adverse capital movements relative to the attractiveness of yields offered on the long end of the curve and to this end has increased its exposure in this area in order to reduce its relative risk.

During September the Nedgroup Investments Bond Fund provided an average return relative to the peers in the sector.

The FTSE JSE All Share Index decreased by 5.7% in the month of June, driven by primarily by Resources (-13.6%), Industrials (-2.7%) and Financials (-2.4%). Resources, Industrials and Financials comprised 31%, 50% and 19% respectively of the FTSE JSE All Share free float index (at the beginning of the month). The Rand strengthened against all of the major currencies: the British Pound (1.3% to R15), Dollar (2.1% to R9.9) and Euro (2.0% to R12.9). The Commodity Index (CRB) lost 2.2% in dollar terms. The Dollar gold price dropped 11.1% and Dollar oil price increased 2.6% to around $103 per barrel.

The All Bond Index lost 1.5% for the month; while the BESA Barclays Inflation-Linked Bond Index lost 5.5%. The STeFI Call Deposit Index returned 0.4%. CPI decreased 0.3% m-o-m to the end of May.

There can be no doubt as to the significant impact the mooted tapering of US quantitative easing program will have on world markets. Statements by Mr Bernanke in June triggered a selloff in global markets as investors factored in their pricing the potential prospect of a gradual end to an era of cheap money. Data coming out of the US will be of importance going forward as the Federal Reserve Chairman stressed that changes to the QE program will be dependent on economic data.

Locally, the flow reversal in non-resident capital that was evident last month was stronger in June. Last year, total non-resident flows were positive at over R83bn in the combined bond and equity markets. In contrast, the year to date non-resident flows for 2013 are currently around R18bn. This figure may be eroded in the coming months if the current trend for capital flows continues. The sensitivity of the Rand and the bond yields to the flow of capital has negative implications on local imported inflation, the current account deficit and financing costs for government debt. Continued weakness and lacklustre growth figures may force the SARB to increase rates while the economy is weak if inflation figures remain firmly above the 6% target limit.

The most recent PPI and CPI inflation figures showed moderation from the previous month's figures and both numbers came in below consensus expectations. CPI inflation figures were lower than the previous month by 0.3%, printing at 5.6% y-o-y. Although the decrease in the petrol price contributed to the lower y-o-y CPI inflation figure, food inflation increased by 0.4% to 6.7% y-o-y. Inflation is expected to remain within the SARB target band in the short term, although temporary breaches may occur. The lower PPI figure of 4.9% y-o-y from 5.4% last month, lends some support to this view. In light of the current data, we expect the MPC to maintain the current monetary policy stance while inflation figures remain contained in the band and growth figures remain weak.

Growth in money supply and PSCE y-o-y figures decreased from last month's figures. M3 printed at 9.8% y-o-y while PSCE came in at 9.1%. The decrease in credit numbers was due to a deceleration in both corporate and household credit growth, although the percentage decrease in household credit growth was the larger of the two. Further moderation in credit figures is expected given the challenging business environment and the high levels of indebtedness of consumers.

The lower inflation figures provide support to the current monetary policy and the forecast shows that the SARB will likely hold the repo at 5% until year end. There is risk to this outlook due to the uncertainty of when the US will begin unwinding QE and the market reaction to this event. The low interest rate environment is expected to persist, however the markets are pricing in rate hikes within 12 months. Any changes in monetary policy, domestic and abroad, will be dependent on significant changes in economic data.

The aim of the Nedgroup Investments Bond Fund is to produce superior risk adjusted returns relative to peers. Studies have shown that that there is very little persistent skill in the timing of duration bets and consequently the ability to outperform on a consistent basis. The approach of this Fund attempts to outperform peers through the following: > staying largely neutral on modified duration; > lower fees; > a low turnover approach; > prudent and timeous exposure to credit to enhance returns; and > optimal portfolio construction to select stock exposures.

To achieve this goal the Fund has started to reduce its negative duration position by purchasing longer dated bonds and at the same time this has increased the funds carrying yield. This lower duration had a positive performance effect relative to its peers on average for the month of June. Over time the Fund will be systematically realigned to the fund management approach above when the market offers opportunities, such as increased risk premia on an absolute or on a relative basis across the yield curve. The month of June provided opportunities realign the fund relative to the All Bond index and the peers and as a result investors should see less deviation relative to the peers.