Malta Government Bond Fund

The Fund aims to maximise the total level of return for investors through investment, primarily, in debt securities and money market instruments issued by the Government of Malta. The Investment Manager may also invest directly or indirectly via eligible ETFs and/or eligible CISs) up to 15% of its assets in “Non-Maltese Assets” in debt securities and/or money market instruments issued or guaranteed by Governments of EU, EEA and OECD Member States other than Malta. The Investment Manager will not be targeting debt securities of any particular duration, coupon or credit rating.

The Fund is actively managed, not managed by reference to any index.

The Investment Manager of the CC High Income Bond Funds – EUR and USD has the duty to ensure that the underlying investments of the funds are well diversified. According to the prospectus, the investment manager has to abide by a number of investment restrictions to safeguard the value of the assets

April 2026

Introduction

Malta’s economy grew by 2.1% YoY in the fourth and final quarter of 2025, slowing modestly from 3.0% in Q3. Growth continued to significantly outperform the Eurozone, where GDP expanded by just 0.2% which came in below earlier estimates of 0.3%. The region’s largest economy, Germany, expanded by 0.3% in the same quarter, confirming preliminary estimates and marking a clear rebound from the stagnation recorded in the previous quarter.

Meanwhile, Malta’s annual inflation rate stood at 2.3% in March, unchanged from the previous two months. It remained the lowest reading since March 2025, as prices were steady for health, while costs increased for housing and utilities, furnishings and household equipment, recreation and culture, and restaurants and hotels.

Market environment and performance

In the Eurozone, economic momentum showed clear signs of softening, partly reflecting the spillover effects of tensions in the Middle East. Growth in Q1 2026 undershot expectations, marking the slowest pace of expansion since Q2 2022. Forward-looking indicators also pointed to a weakening outlook, with the S&P Global Eurozone Composite PMI declining to 48.6 in April from 50.7 in March, well below expectations of 50.2 and signaling the sharpest contraction in private-sector activity since November 2024. The drop indicated a somewhat delayed impact on the services sector from the war in Iran, as higher energy costs weighed on consumer demand. In turn, the manufacturing sector continued to expand (52.2 vs. 52.0), despite ongoing challenges in sourcing input goods.

Consumer price inflation rose to 3.0% in April, up from 2.6% in March and slightly above market expectations of 2.9%, according to a preliminary estimate. This marked the highest reading since September 2023 and the second consecutive month in which inflation has exceeded the ECB’s 2% target, as energy costs soared 10.9%.

On the policy front, the European Central Bank (ECB) kept interest rates unchanged at its April 2026 meeting, maintaining a cautious approach amid elevated uncertainty stemming from developments in the Middle East. ECB President Christine Lagarde stressed that longer-term inflation expectations remain broadly anchored, even as shorter-term expectations have risen significantly. She also noted that, although policymakers considered a range of alternatives – including a possible rate hike – the decision to hold rates was unanimous, reflecting the ECB’s view that conditions are moving away from its baseline scenario.

Fund performance

The CC Malta Government Bond Fund saw a 0.46% loss in the month of April.

Market and investment outlook

In April, benchmark yields continued to be driven by developments in the Middle East, alongside economic data releases and central bank policy signals. On the economic front, inflation accelerated notably, while leading indicators pointed to a contraction in business activity, underscoring the negative impact of higher energy costs and ongoing supply disruptions on the real economy. Against this backdrop, the European Central Bank (ECB) kept interest rates unchanged but adopted a cautious tone with an increasingly hawkish bias, particularly if near-term inflationary pressures prove persistent. Policymakers also acknowledged that economic conditions are gradually diverging from the ECB’s baseline expectations.

Government bond markets were mixed over the month, with German Bunds underperforming relative to other European sovereigns. Core euro area yields moved modestly higher, particularly at the longer end of the curve, as investors scaled back expectations for ECB rate cuts and, in some cases, began pricing in the possibility of further tightening. Peripheral spreads, however, remained relatively stable, supported by resilient risk appetite and continued demand for carry.

Looking ahead, the outlook remains highly uncertain. Although there have been intermittent signs of de-escalation in the Middle East conflict, these have so far proven short-lived, with tensions continuing to persist. Ongoing disruption to energy flows through the Strait of Hormuz – a critical global energy chokepoint – may therefore continue to shape the trajectory of European sovereign yield curves. The broader economic consequences will depend largely on the duration and intensity of the conflict. For Europe in particular, the implications could be meaningful given the region’s dependence on imported energy. Persistently elevated energy prices are likely to continue feeding through to inflation and ultimately weighing on consumer spending and broader economic activity.

Against this backdrop, maintaining a vigilant and flexible approach will be essential at fund level. Close monitoring of geopolitical developments, their implications for Europe’s economic outlook, and the ECB’s forthcoming policy decisions will be key in determining the appropriate duration positioning within the portfolio. In addition, we intend to retain exposure to European sovereign bonds, making use of the permitted 15% allocation.