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Summary
- Timely passage of this signature legislative bill offered an optimistic backdrop for markets early on in the quarter.
- Greater fears of a loss of Fed independence was the natural outcome, causing the yield curve to steepen.
- We continue to believe that current valuations in the investment grade corp…
Summary
- Timely passage of this signature legislative bill offered an optimistic backdrop for markets early on in the quarter.
- Greater fears of a loss of Fed independence was the natural outcome, causing the yield curve to steepen.
- We continue to believe that current valuations in the investment grade corporate sector remain rich, and we maintained the Fund’s underweight versus the Index.
- Offsetting the corporate underweight, the Fund maintained its overweight to the securitized sector, including residential mortgage-backed securities.
- The Fund’s positive absolute return of +1.93% trailed the Index return of +2.03% for the quarter.
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Market Review
The third quarter began with the Trump administration signing into law the One Big Beautiful Bill Act on July 4. Having met its self-imposed deadline, timely passage of this signature legislative bill offered an optimistic
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I maintain an underweight to investment grade corporates due to rich valuations, balanced by overweighting securitized sectors, particularly RMBS, to capture relative value.
The underweight to investment grade corporates detracted from relative performance, while the RMBS overweight provided the main positive contribution.
Fed rate cuts and yield curve steepening are supportive, but I remain vigilant on Fed independence risks and trade policy shifts, which could affect sector allocations and risk posture.