Insight – Cincinnati Asset Management

21 Feb 2025

High Yield Weekly, Insight Rich Balestra - Portfolio Manager 0 comment

CAM High Yield Weekly Insights

(Bloomberg) High Yield Market Highlights

US junk bond yields edged up, looking through trade tariffs noise and mixed earnings, with Walmart posting disappointing forecasts on Thursday. Traders awaited manufacturing PMI data due later today for clues on the interest-rates path.
Higher yields continued to bring borrowers into the market
Four companies sold a little more than $3b in just three sessions to drive the month’s volume to $16b
Spreads remain tight, bolstered by strong technicals and demand for all-in yield, strategists Brad Rogoff and Dominique Toublan from Barclays wrote this morning
There is a lack of near-term catalyst to materially disrupt credit markets, they added
Yields closed at 7.20% and spreads at 261 basis points
CCC yields closed at 9.84% and spreads unchanged at 530

(Bloomberg) Fed Minutes Signal Officials on Hold Until Inflation Improves

Federal Reserve officials in January expressed their readiness to hold interest rates steady amid stubborn inflation and economic-policy uncertainty.
“Participants indicated that, provided the economy remained near maximum employment, they would want to see further progress on inflation before making additional adjustments to the target range for the federal funds rate,” minutes from the Federal Open Market Committee’s Jan. 28-29 meeting showed.
The minutes, released Wednesday in Washington, said “many participants noted that the committee could hold the policy rate at a restrictive level if the economy remained strong and inflation remained elevated.”
Officials held the Fed’s benchmark policy rate in a range of 4.25%-4.5% at that gathering.
The record of the meeting underscored the cautious approach Fed policymakers are taking after lowering interest rates by a percentage point in the closing months of 2024. Several officials have said they’d like to see inflation cool further toward the Fed’s 2% target before backing another cut.
Investors are currently pricing in one rate cut in 2025, with the possibility of a second, according to futures markets.
Policymakers are watching the rollout of Trump’s economic-policy plans and how they might shape the economy. Trump is pushing an agenda that includes an increased use of tariffs on US trading partners and an immigration crackdown, both of which could affect the outlook for inflation, the labor market and economic growth.
While characterizing risks in the economy as roughly balanced, policymakers “generally pointed to upside risks to the inflation outlook,” the minutes said.
“Participants cited the possible effects of potential changes in trade and immigration policy, the potential for geopolitical developments to disrupt supply chains, or stronger-than-expected household spending,” the minutes showed.
Still, officials expected that “under appropriate monetary policy” inflation would continue to decline toward their 2% goal.
Some policymakers also noted that difficulties in fully removing seasonal distortions from inflation data at the start of the year could make the figures “harder than usual to interpret.”

21 Feb 2025

Insight, Investment Grade Weekly Josh Adams - Portfolio Manager 0 comment

CAM Investment Grade Weekly Insights

Credit spreads remained near their tightest levels of 2025 during the holiday shortened week. The option adjusted spread of the Bloomberg US Corporate Bond Index closed at 78 on Thursday February 20 after closing the week prior at the same level. The 10yr Treasury yield did not exhibit much change during the week and was 3 basis points lower on the week through Thursday evening. Through Thursday, the Corporate Bond Index year-to-date total return was +1.15% while the yield to maturity for the Index closed the day at 5.28%.

Economics

The highlight of an otherwise quiet week was the Wednesday release of the minutes from the January FOMC meeting. The minutes showed that the majority of policymakers believed that inflation was somewhat elevated and that they needed to see continued disinflation in order to be confident about the longer term 2% target. As of Friday morning, interest rate futures were pricing almost no chance of a cut at the March meeting which is just less than a month away. Futures were pricing in a 24% cut at the May meeting and a 41% chance in June. All told, traders are still expecting roughly 1.7 cuts before the end of this year (between 1 and 2). Recall that the dot plot released at the end of December showed a median expectation from the FOMC of 2 cuts in 2025. A new dot plot will be released at the March meeting.

Next week will be incredibly busy as far as economic releases are concerned. Prints that have market moving potential include GDP, Core PCE and Personal Income/Spending on Thursday and Friday.

Issuance

New corporate issuance handily topped the estimate of $40bln on the week with the finally tally coming in at more than $52bln. This was an especially impressive haul considering that the market was closed on Monday in observance of President’s Day. Concessions ticked higher this week as new issuers paid about 5bps for new bonds relative to secondary issues. Syndicate desks are looking for around $30bln of new supply next week as February comes to a close.

Flows

According to LSEG Lipper, for the week ended February 19, investment-grade bond funds reported a net inflow of +1.82bln. Total year-to-date flows into investment grade funds were +$14.2bln.

14 Feb 2025

High Yield Weekly, Insight Rich Balestra - Portfolio Manager 0 comment

CAM High Yield Weekly Insights

(Bloomberg) High Yield Market Highlights

US junk bonds snapped back on Thursday, notching the biggest one-day returns in a week after it became clear that reciprocal tariffs were not likely before April. Yields tumbled six basis points to 7.26%.
The gains spanned across ratings. CCCs, the riskiest part of the high-yield market, racked up gains of 0.22%, the most in three weeks, after yields dropped eight basis points to 9.91%. Risk assets rallied across markets as stocks came close to their all-time highs.
Undeterred by the heightened volatility and uncertainty around trade policy, bankers led by Morgan Stanley offloaded $4.7b of debt of X Holdings Corp, formerly known as Twitter, at par, tighter than early indications of 98 cents on the dollar. This was the third tranche in two weeks
The high yield primary market priced two more deals, lifting the month’s supply to $13b
Persistent yield-driven demand and still-intact fundamentals continue to underpin credit market stability, Brad Rogoff and Dominique Toublan at Barclays wrote on Friday
Yields and spreads, though, moved in a narrow range this week amid daily uncertainty around tariffs and stubborn inflation data renewing concerns about Fed keeping rates higher for longer, disrupting steady growth

(Bloomberg) US Inflation Tops Forecasts, Bolstering Case for Fed to Hold

US inflation picked up broadly at the start of the year, further undercutting chances of multiple Federal Reserve interest-rate cuts this year.
The monthly consumer price index rose in January by the most since August 2023, led by a range of household expenses like groceries and gas, as well as housing costs. Excluding often-volatile food and energy costs, the so-called core CPI climbed 0.4%, more than forecast, fueled by car insurance, airfares and a record monthly increase in the cost of prescription drugs.
Inflation tends to come in higher in January, because many companies choose the start of the year to hike prices and fees. That pattern has been exacerbated in the post-pandemic era, and several forecasters suggested that the jump in price growth last month won’t be repeated going forward.
Still, Wednesday’s report from the Bureau of Labor Statistics serves as further evidence that inflation progress has at least stalled — if not in danger of being reversed. Combined with a solid labor market, it will likely keep the Fed on hold for the foreseeable future. Policymakers are also awaiting further clarity on Trump’s policies.
“We saw strength across the board — whether you’re looking at energy, food, within core components — and so I think it points to a price environment that still remains difficult as far as the Fed is concerned,” said Sarah House, a senior economist at Wells Fargo & Co. “So for how long you expected the Fed to be on hold going into this report, I think this only lengthens that time frame.”
Fed Chair Jerome Powell, speaking before the House Wednesday, said the latest consumer price data show that while the central bank has made substantial progress toward taming inflation, there is still more work to do.
“I would say we’re close, but not there on inflation,” Powell told the House Financial Services Committee in response to a question on the second day of his semi-annual testimony to Congress.
The January increase in the CPI was led by grocery prices, with two-thirds of that advance due to higher egg prices in the wake of a deadly bird flu outbreak. The more-than 15% jump was the largest since June 2015. Costs of hotel stays and used cars also climbed, possibly in the aftermath of severe wildfires in Los Angeles.
The report incorporated new weights for the consumer basket to try to more accurately capture Americans’ spending habits, which resulted in minimal revisions to the CPI last year.
Seasonal adjustments to January data were also minimal, and failed to offset the turn-of-the-year price hikes. As a result, “the sharp increase in the core CPI is less alarming than it first appears,” Sam Tombs, chief US Economist at Pantheon Macroeconomics, said in a note. “We recommend waiting for February’s data, when the new seasonal factors look set to dampen the seasonally adjusted index more than in previous years, before judging how the underlying trend has evolved.”
Goods costs excluding food and energy rose by the most since May 2023. However, when removing used cars, the index was little changed.
Policymakers also pay close attention to wage growth, as it can help inform expectations for consumer spending — the main engine of the economy. A separate report Wednesday that combines the inflation figures with recent wage data showed real hourly earnings grew 1% from a year ago.

31 Jan 2025

High Yield Weekly, Insight Rich Balestra - Portfolio Manager 0 comment

CAM High Yield Weekly Insights

(Bloomberg) High Yield Market Highlights

US junk bonds rallied for five straight sessions on Thursday and are headed for best monthly gains since September, after a slew of data showed economic strength and a steady labor market. Yields have dropped 30 basis points this month, also the biggest monthly decline since September, reaching a six-week low of 7.19%.
The gains spanned across the risk spectrum in January. CCCs, the riskiest part of the junk bond market, are set to reap positive returns for the ninth consecutive month and the longest such run since June 2021. CCC yields tumbled 40 basis points this month to 9.76%, the biggest monthly drop since November.
The broad gains accelerated after Federal Reserve Chair Jerome Powell reiterated that the economy is strong and the labor market is resilient, reviving the supply starved primary market. January is poised to be the busiest month for supply since October.
The primary calendar is getting crowded.
The week has already priced $6.85b, the busiest since the week-ended September 27
BBs are also on track to post the best monthly returns since August. Yields fell 26 basis points to 6.13%

(Bloomberg) Powell Says Fed Doesn’t Need to Be in a Hurry to Lower Rates

Federal Reserve Chair Jerome Powell said officials are not in a rush to lower interest rates, adding the central bank is pausing to see further progress on inflation following a string of rate reductions last year.
“We do not need to be in a hurry to adjust our policy stance,” Powell said Wednesday, noting that the economy remains strong and interest rates are no longer restraining the economy as much as they had been.
The Federal Open Market Committee voted unanimously to keep the federal funds rate in a range of 4.25%-4.5%, after lowering rates by a full percentage point in the final months of 2024.
Strong economic growth coupled with a solid labor market allows officials to wait for further evidence of cooling inflation before adjusting rates again. It also offers them time to evaluate how President Donald Trump’s policies on immigration, tariffs and taxes may impact the economy.
“The committee is very much in the mode of waiting to see what policies are enacted,” Powell said. “We need to let those policies be articulated before we can even begin to make a plausible assessment of what their implications for the economy will be.”
When asked specifically about the potential for cutting rates at the Fed’s next meeting in March, Powell reiterated policymakers are not in a rush to lower borrowing costs. He stressed that the Fed wants to see “serial readings” suggesting further progress on inflation.
Taken together with comments from other officials in recent weeks, the remarks indicate the Fed could remain on hold for some time.
In a post-meeting statement, officials repeated that inflation remains “somewhat elevated” but removed a reference to it having made progress toward their 2% goal — a change Powell said wasn’t meant to send a policy signal. Fed policymakers also updated their description of the labor market.
“The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid,” according to the statement.
Officials also reiterated that the risks to their inflation and employment goals are “roughly in balance” and that the “extent and timing” of additional rate adjustments will depend on incoming data and the outlook.
Fed officials want to keep some downward pressure on the economy to ensure inflation cools to their 2% target, but a key question for policymakers right now is just how much interest rates are currently restraining activity.
Powell said he believes policy is meaningfully but not highly restrictive, adding rates are “meaningfully above” the so-called neutral rate, a stance of policy that neither dampens nor stimulates growth. Officials have repeatedly revised up their estimates of this rate over the past year amid stronger-than-expected economic activity and robust productivity growth.

31 Jan 2025

Insight, Investment Grade Weekly Josh Adams - Portfolio Manager 0 comment

CAM Investment Grade Weekly Insights

Credit spreads remained near their tightest levels of 2025 during the week. The option adjusted spread of the Bloomberg US Corporate Bond Index closed at 79 on Thursday January 30 after closing the week prior at 78. The 10yr Treasury yield moved lower on Monday morning and then traded in a tight range thereafter. The benchmark rate was 10 basis points lower on the week as we went to print Friday morning. Through Thursday, the Corporate Bond Index year-to-date total return was +0.75% while the yield to maturity for the Index closed the day at 5.29%.

Economics

It was a very busy week for economic releases that also included an FOMC meeting. On Tuesday we got a positive indicator as demand for core capital goods rose more than expected in December. However, data on that very same day showed that consumer confidence declined in the month of January. Wednesday’s Fed meeting was in-line with expectations as the central bank held rates steady and signaled that it is in no hurry to cut rates further. Recall that the Fed’s last dot plot in December showed the median expectation of just 50bps worth of rate cuts in 2025. There are now some economists on the street with out of consensus calls looking for no cuts at all or possibly even rate hikes if inflation surprises to the upside. Thursday’s GDP release showed that the U.S. economy ended 2024 on a solid note, expanding at a +2.3% annualized rate in the fourth quarter of the year. Finally on Friday, we got the Fed’s preferred inflation gauge with core PCE coming in at +2.8%, which was on the mark relative to forecasts. The consumer spending portion of the data release was strong for the second consecutive month but this was balanced out by the savings rate which dipped to a two-year low.

Next week is another busy one with ISM manufacturing/services and a host of other eco-prints. The finale will come on Friday morning with the January unemployment report.

Issuance

New corporate issuance beat estimates this week, topping $31bln. The monthly total also eclipsed the $175bln dealer forecast coming in at $186.4bln for January. This was just $3bln less than the record-breaking January 2024 tally. Syndicate desks are looking for February to be a strong month as well with forecasts predicting $175bln of new debt.

Flows

According to LSEG Lipper, for the week ended January 29, investment-grade bond funds reported a net inflow of +1.34bln. Total year-to-date flows into investment grade funds were +$5.29bln.

31 Jan 2025

Insight, Investment Grade Quarterly CAM Team 0 comment

COMENTARIO SOBRE EL 4.º TRIMESTRE Y PERSPECTIVAS PARA 2025

COMENTARIO SOBRE EL 4.º TRIMESTRE Y PERSPECTIVAS PARA 2025
Enero de 2025
Fue un año sólido para el crédito con grado de inversión, ya que la mayoría de las empresas pudieron expandir sus ingresos y al mismo tiempo mantener balances saludables. Estas hazañas se lograron en gran medida gracias a una economía estadounidense que siguió creciendo. Aunque los bonos de grado de inversión registraron rendimientos positivos durante el año 2024, el cuarto trimestre fue decepcionante debido al aumento de los rendimientos de los bonos del Tesoro, lo que afectó los resultados.

Año 2024 en revisión
Durante 2024, el diferencial ajustado por opciones (OAS) en el Índice de bonos corporativos de EE. UU. de Bloomberg se redujo en 19 puntos básicos a 80 después de haber abierto el año en un diferencial de 99. Las porciones de menor calidad del universo de grado de inversión superaron a las de mayor calidad, ya que los inversores buscaron rendimiento en medio de un nivel histórico de ajuste de diferenciales. Los créditos intermedios tuvieron un mejor desempeño que los de mayor duración debido al incremento de los rendimientos de los bonos del Tesoro.

El rendimiento de los diferenciales y los cupones se impuso a los bonos corporativos en 2024. Como inversores en bonos, medimos el “exceso de rentabilidad” como la rentabilidad total de un bono corporativo menos la rentabilidad total del bono gubernamental subyacente. El exceso de rentabilidad del Índice corporativo fue de +2.46 % para todo el año 2024, más que el rendimiento total de ese índice de +2.13 %. Esto significa que el desempeño subyacente de los bonos del Tesoro fue negativo (debido a que los rendimientos de los bonos del Tesoro aumentaron) y que los bonos corporativos pudieron superar esto y registrar rendimientos totales positivos gracias al ajuste de los diferenciales y al mayor ingreso por cupones disponible en los bonos corporativos en relación con los bonos del Tesoro. La adecuación es única para cada inversor, pero para los inversores que pueden tolerar una cantidad modesta de riesgo crediticio, el desempeño de 2024 muestra que las carteras pueden beneficiarse al dar preferencia a los bonos corporativos IG gestionados activamente en lugar de solo los bonos del Tesoro.

Las industrias con mejor rendimiento en 2024 fueron las aerolíneas y las empresas financieras. Los ferrocarriles y otros sectores industriales fueron los dos sectores con peor rendimiento en relación con el Índice. La mayoría de las industrias registraron rendimientos totales positivos para todo el año, y solo un puñado de industrias mostraron un rendimiento negativo.
Las tasas de interés fueron volátiles durante 2024, particularmente en las porciones intermedias y cortas de la curva de rendimiento. El bono del Tesoro a 10 años cerró el 2024 en 4.57 % después de abrir el año en 3.88 %. Si observamos el extremo inicial de la curva, el bono del Tesoro a 2 años terminó el año en 4.24 %, solo un punto básico por debajo de donde terminó 2023; pero eso no cuenta la historia completa de cuán volátil fue este valor durante 2024. El bono a 2 años cotizó por encima del 5 % a fines de abril y luego bajó a 3.54 % en los días posteriores al primer recorte de tasas de la Reserva Federal en la segunda mitad de septiembre. Luego, el bono a 2 años subió a 4.24 % a fin de año, ya que los operadores comenzaron a aceptar el mensaje de la Reserva Federal sobre un camino más cauteloso en su ciclo de flexibilización y la creencia de que los recortes de tasas podrían desarrollarse durante un tiempo más largo de lo inicialmente anticipado. El bono del Tesoro a 5 años terminó el año 53 puntos básicos más alto que donde comenzó, pero se cotizó dentro de un rango de unos 132 puntos básicos. El bono a 5 años se cotizó cerca de su mínimo del 3.40 % justo antes de la reunión de la Reserva Federal de septiembre antes de subir durante los últimos tres meses del año, terminando en el 4.38 %.

Al analizar los dos gráficos ilustrados anteriormente, la conclusión más importante para los inversores y los gestores de bonos activos es que la curva del Tesoro a 2/10 terminó su período de inversión de 793 días a principios de septiembre. La curva se había invertido desde julio de 2022, lo que representó el período de inversión más prolongado registrado hasta la fecha. Si bien una inversión a 2/10 suele ser un presagio de recesión, hasta ahora la economía estadounidense ha logrado mantenerse sobre una base sólida. Solo en una ocasión anterior una curva de rendimiento invertida no logró anticipar una recesión, durante el breve período de inversión asociado con la crisis del rublo ruso en 1998. Una curva pronunciada es útil para los gestores activos, ya que les permite realizar operaciones económicas de venta y extensión y, al mismo tiempo, expone a los inversores al poder de la caída de la curva y su capacidad para magnificar los rendimientos.

Perspectivas para el 2025

Adoptamos una perspectiva favorable sobre el potencial de los bonos de grado de inversión para generar rendimientos atractivos durante el próximo año. La probabilidad de una compresión adicional de los diferenciales es probablemente limitada dado que el mercado cotiza cerca del extremo ajustado de las valoraciones históricas. Para nosotros, tal como escribimos a fines de 2023 y en cada trimestre posterior, es el rendimiento total lo que actualmente hace que la clase de activo sea atractiva tanto en términos absolutos como relativos. El rendimiento promedio del Índice durante los últimos 10 años fue del 3.67 % y terminó 2024 en el 5.34 %, superior a la de finales de 2023, cuando fue del 5.06 %.

En términos relativos, según una métrica, las acciones están en su nivel más sobrevaluado frente al crédito corporativo y los bonos del Tesoro desde 2008. Un estudio reciente de Bloomberg comparó el rendimiento de las ganancias de las acciones del S&P 500 (3.7 %) con el rendimiento más bajo del Índice corporativo de BAA de Bloomberg (5.6 %), y encontró una brecha de 190 puntos básicos al 6 de enero de 2025.

El rendimiento de las ganancias del S&P 500 suele ser mayor que el rendimiento de los bonos corporativos para compensar a los inversores por el riesgo adicional asociado con las acciones. Vale la pena destacar que este es solo un dato puntual, y esta métrica se mantuvo negativa durante toda la década de 1990 antes de volverse positiva en 2003. Aun así, creemos que los inversores deberían tomar nota de este acontecimiento: los bonos de alta calidad salen baratos en comparación con otros activos de riesgo en términos relativos, lo que sugiere que pueden merecer una porción mayor de la asignación total de activos de un inversor.
En términos generales, los indicadores crediticios de grado de inversión se mantuvieron sólidos durante 2024 y están bien posicionados para seguir una trayectoria similar en 2025. Según una investigación llevada a cabo por Barclays, al final del tercer trimestre de 2024, el apalancamiento neto para el Índice fue de 3.0 veces mayor, un aumento de 0.2 veces año tras año y la cobertura de intereses fue de 11.7 veces mayor, un deterioro de 1.3 veces respecto del año anterior. Mientras tanto, el crecimiento del EBITDA fue positivo durante los primeros tres trimestres de 2024 y los márgenes de EBITDA aumentaron un punto porcentual completo durante el año pasado hasta el 30.6 %, un nuevo máximo histórico. La mejor forma de describir las métricas crediticias a medida que nos acercamos a 2025 es como “estables”, una característica que consideramos favorable. Como gestor activo con una cartera relativamente concentrada, nos preocupamos menos por el universo general y, en cambio, nos centramos en un número relativamente pequeño de emisores que pueblan nuestras carteras de inversores.

Posicionamiento de la cartera

Somos consistentes en nuestro enfoque de gestión de cartera, lo que significa que no realizamos cambios generalizados en nuestra estrategia de un año o trimestre al siguiente. Ofrecemos valor a nuestros inversores mediante la creación de cuentas personalizadas, gestionadas por separado y compuestas por bonos individuales cuidadosamente investigados. Existen varios principios clave en los que nuestros inversores pueden confiar al elegir la Estrategia de Grado de Inversión de CAM:

Diversificación: se ingresan datos iniciales para cada cuenta individual con 20 a 25 posiciones. Esto da como resultado una cartera concentrada en relación con el Índice pero que aún así logra una diversificación suficiente a nivel de sector/industria. Cada cuenta se llena con nuestras mejores ideas durante un período de inversión que tarda entre 6 y 8 semanas en completarse y al que llamamos ciclo económico abreviado.
Sobreponderación de alta calidad: CAM fija un límite para cada cuenta de una exposición del 30 % a bonos con calificación BAA, que representan la porción más riesgosa del universo de grado de inversión. El Índice tuvo una ponderación del 47.66 % en créditos con calificación BAA a finales de 2024.
Vencimiento intermedio: siempre buscaremos posicionar la cartera dentro de una banda de vencimiento intermedio que oscila entre los 5 y 10 años, aunque ocasionalmente podemos mantener los bonos por un período más corto si las condiciones del mercado lo justifican. A finales 2024, nuestro compuesto presentó una duración modificada de 5.49, en comparación con la duración del Índice, que fue de 6.98.

El marco anterior nos ayuda a lograr el objetivo de nuestro proceso, que es proporcionar una cartera personalizada con un rendimiento tan bueno como el del Índice o mejor, incurrir en una menor volatilidad y priorizar la preservación del capital.

El mayor “cambio” notable en 2024 fue más una normalización que un cambio de estrategia. Nos hemos beneficiado de la mencionada reanudación de la inclinación de la curva de rendimiento y su impacto en nuestra capacidad para participar en operaciones económicas de venta y extensión. En pocas palabras, ha sido mucho más atractivo para nosotros ejecutar estas operaciones, lo que permitió que la rotación de nuestra cartera se recupere a niveles más consistentes con los promedios históricos. Los inversores que han estado con nosotros durante varios años probablemente hayan notado esta actividad; aquellos que han estado con nosotros durante 2 o 3 años probablemente verán un aumento en la actividad de venta en 2025 si las condiciones del mercado siguen siendo favorables.
De cara al año 2025, evitamos activamente empresas individuales con exposición a la desestabilización geopolítica y mantenemos nuestra estrategia de no tener exposición a los sectores de ocio, alojamiento, restaurantes ni juegos. También tenemos una infraponderación significativa en minoristas.

El FOMC adopta un enfoque deliberado
La Reserva Federal implementó recortes de tasas por un total de 100 puntos básicos en 2024, distribuidos en tres reuniones durante los últimos 3.5 meses del año. El tema principal del momento son las expectativas futuras sobre el camino de la flexibilización, ya que la Reserva ha sido cuidadosa al moderar su postura sobre futuros recortes en medio de una inflación rígida, un fuerte gasto del consumidor y un mercado laboral resistente. Con la reunión de diciembre del Comité Federal de Mercado Abierto (FOMC) llegó la actualización trimestral del publicitado “diagrama de puntos” de la Reserva Federal, que muestra una estimación mediana de dos recortes de tasas en 2025, por debajo de los cuatro proyectados previamente en la publicación de septiembre. El 8 de enero se publicaron las actas de la reunión de diciembre del FOMC, que muestran los detalles de la visión cautelosa de la Reserva Federal sobre el año que viene:
“Al analizar las perspectivas de la política monetaria, los participantes indicaron que el Comité se encontraba en un punto o cerca de él en el que sería apropiado desacelerar el ritmo de flexibilización de la política monetaria”. “Además, muchos participantes sugirieron que una variedad de factores subrayaban la necesidad de adoptar un enfoque cuidadoso respecto de las decisiones políticas momentáneas en los próximos trimestres”.
Creemos que la Reserva Federal está adoptando un enfoque prudente, especialmente con la incertidumbre que genera la administración entrante de Trump sobre comercio, aranceles, inmigración, impuestos y política exterior. La Reserva Federal siempre tiene la opción de revertir el rumbo y recortar su tasa de interés más agresivamente si la economía se desacelera.

Un año de oportunidades
Como hemos escrito antes, cuando se trata de tasas de interés, que sean “más altas durante más tiempo” no es negativo para los inversores en bonos. Recortar cupones por encima del 5 % para empresas con calificación IG saludable es una propuesta de valor atractiva. Sin embargo, creemos que las tasas más altas seguirán afectando a ciertos sectores de la economía, como la vivienda, y tendrán un impacto enorme en las pequeñas empresas, que son fundamentales para la salud de la economía estadounidense. A finales de 2023, señalamos que considerábamos probable que ocurriera una recesión en 2024 o en algún momento de 2025. Obviamente, eso no se ha materializado y, aunque mantener ese pronóstico estaría muy lejos del consenso, seguimos pronosticando que existe una probabilidad razonable de recesión. Un escenario que podría llevarnos a esa situación es que el contexto económico se deteriore y la Reserva Federal tarde demasiado en reaccionar. Otros escenarios de recesión podrían originarse por factores geopolíticos o por consecuencias no deseadas de las políticas económicas y el creciente déficit de los Estados Unidos. Somos cautelosos ante estas incertidumbres. La preservación del capital es una prioridad central en nuestra estrategia de grado de inversión, lo que nos lleva a posicionar constantemente la cartera para mitigar el impacto de posibles crisis económicas. En última instancia, invertir siempre consiste en recibir una compensación adecuada por el riesgo; en el entorno actual, consideramos que la modesta compensación por el riesgo incremental es insuficiente. Seguiremos centrándonos en bloquear y abordar esto mientras llenamos las carteras de los inversores con empresas que puedan perseverar en una variedad de entornos económicos.
Gracias por su continuo interés y apoyo. Le deseamos todo lo mejor para el año 2025 y esperamos que sea un año lleno de éxitos.

Esta información solo tiene el propósito de dar a conocer las estrategias de inversión identificadas por Cincinnati Asset Management. Las opiniones y estimaciones ofrecidas están basadas en nuestro criterio y están sujetas a cambios sin previo aviso, al igual que las declaraciones sobre las tendencias del mercado financiero, que dependen de las condiciones actuales del mercado. Este material no tiene como objetivo ser una oferta ni una solicitud para comprar, mantener ni vender instrumentos financieros. Los valores de renta fija pueden ser vulnerables a las tasas de interés vigentes. Cuando las tasas aumentan, el valor suele disminuir. El rendimiento pasado no es garantía de resultados futuros. El rendimiento bruto de la tarifa de asesoramiento no refleja la deducción de las tarifas de asesoramiento de inversión. Nuestras tarifas de asesoramiento se comunican en el Formulario ADV Parte 2A. En general, las cuentas administradas mediante programas de firmas de corretaje incluyen tarifas adicionales. Los rendimientos se calculan mensualmente en dólares estadounidenses e incluyen la reinversión de dividendos e intereses. El Índice no está administrado y no considera las tarifas de la cuenta, los gastos y los costos de transacción. Se muestra con fines comparativos y se basa en información disponible al público tomada de fuentes que se consideran confiables. No se hace ninguna afirmación sobre su precisión o integridad.

La información suministrada en este informe no debe considerarse una recomendación para comprar o vender ningún valor en particular. No hay garantía de que los valores que se tratan en este documento permanecerán en la cartera de una cuenta en el momento en que reciba este informe o que los valores vendidos no se hayan vuelto a comprar. Los valores analizados no representan la cartera completa de una cuenta y, en conjunto, pueden representar solo un pequeño porcentaje de las tenencias de cartera de una cuenta. No debe suponerse que las transacciones de valores o participaciones analizadas fueron o demostrarán ser rentables, o que las decisiones de inversión que tomemos en el futuro serán rentables o igualarán el rendimiento de la inversión de los valores examinados en este documento.
En nuestro sitio web se encuentran disponibles las divulgaciones adicionales sobre los riesgos materiales y los posibles beneficios de invertir en bonos corporativos: https://www.cambonds.com/disclosure-statements/.

i Bloomberg News, 7 de enero de 2025: “Los mercados crediticios advierten de un repunte incesante de las acciones”

ii Barclays Bank PLC, 16 de diciembre de 2024: “Métricas crediticias de grado de inversión de EE. UU. Actualización del tercer trimestre de 2024: probablemente alcanzó su punto máximo”

iii FOMC del Sistema de la Reserva Federal, 8 de enero de 2025: “Actas del Comité Federal de Mercado Abierto: 17 y 18 de diciembre de 2024”

17 Jan 2025

High Yield Weekly, Insight Rich Balestra - Portfolio Manager 0 comment

CAM High Yield Weekly Insights

(Bloomberg) High Yield Market Highlights

US junk bonds are headed for the biggest weekly gain in more than two months after rallying for three straight sessions on optimism that inflation is easing and the Federal Reserve is likely to cut rates.
The core consumer price index came in lower than anticipated this week, reviving hopes for the next rate cut to take place as early as March. Fed Governor Christopher Waller supported the sentiment further, saying the central bank could lower interest rates in the first half of 2025.
US junk bond yields fell 18 basis points in four sessions, closing at 7.34% on Thursday
CCCs are set for 0.7% weekly gains, the best reading in more than two months
BB yields, the most rate-sensitive part of the junk bond market, are poised for a weekly drop
BBs are looking to gain 0.59%, the most since early November
The high yield bond rally this week was partly driven by light supply, with the volume at a modest $7b so far in January
The demand for all-in yield remains solid and is expected to continue through the first half of 2025, Barlcays strategists Brad Rogoff and Dominique Toublan wrote in a note this morning
Fundamentals remain strong across the high yield market, Barclays wrote, with the 2025 default forecast fairly benign

17 Jan 2025

Insight, Investment Grade Weekly Josh Adams - Portfolio Manager 0 comment

CAM Investment Grade Weekly Insights

Credit spreads for most bonds were unchanged on the week as the Index has exhibited little movement in either direction thus far in 2025. The Bloomberg US Corporate Bond Index closed at 80 on Thursday January 16 after closing the week prior at the same level. The 10yr Treasury made a meaningful move lower in yield this week on the back of cooler than expected inflation data. The benchmark yield moved from 4.76% last Friday to 4.61% at the close on Thursday January 16. Through Thursday, the Index year-to-date total return was -0.06% while the yield to maturity for the Index closed the day at 5.37%.

Economics

The economic calendar was busy this week. First CPI came in as a modest surprise to the downside with core CPI coming in softer than expectations. This sparked a rally in Treasuries, driving rates lower. December retail sales were solid, boosting investor confidence in the consumer, but the number was not so good that it ignited fears about the economy overheating. Finally, the housing market showed signs of life on Friday morning with the release of December housing starts data that surprised to the upside in a big way. The housing data wasn’t all roses though as permits did decline signaling that early 2025 releases may not keep pace with December. Next week is pretty light on data with no significant economic releases. Looking further ahead, the next FOMC decision is on January 29. Interest rate futures markets were pricing in a >99% chance that the Fed will hold rates steady at that meeting at the time of our publication.

Issuance

It was a busy week for issuance this week as the banking sector started to report earnings, freeing up their chance to issue new debt. Weekly volume topped the $40bln estimate, coming in just shy of $57bln as Bank of America printed $10bln of new debt on Friday on the heels of $25bln of bank issuance on Thursday. Next week the bond market is closed on Monday in observance of Martin Luther King Jr. Day. Dealers expect $25bln of issuance next week but we would not be surprised to see a larger number amid a constructive funding environment.

Flows

According to LSEG Lipper, for the week ended January 15, investment-grade bond funds reported a net inflow of +591.8mm. Total year-to-date flows into investment grade funds were +$3.01bln.

14 Jan 2025

High Yield Quarterly, Insight CAM Team 0 comment

2024 Q4 High Yield Quarterly

January 2025

In the fourth quarter of 2024, the Bloomberg US Corporate High Yield Index (“Index”) return was 0.17% bringing the year to date (“YTD”) return to 8.19%. The S&P 500 index return was 2.39% (including dividends reinvested) bringing the YTD return to 25.00%. Over the period, while the 10 year Treasury yield increased 79 basis points, the Index option adjusted spread (“OAS”) tightened 8 basis points moving from 295 basis points to 287 basis points.

With regard to ratings segments of the High Yield Market, BB rated securities tightened 1 basis point, B rated securities tightened 8 basis points, and CCC rated securities tightened 84 basis points. The chart below from Bloomberg displays the spread moves in the Index over the past five years. For reference, the average level over that time period was 396 basis points.

The sector and industry returns in this paragraph are all Index return numbers. The Index is mapped in a manner where the “sector” is broader with the more specific “industry” beneath it. For example, Energy is a “sector” and the “industries” within the Energy sector include independent energy, integrated energy, midstream, oil field services, and refining. The Transportation, Communications, and Brokerage sectors were the best performers during the quarter, posting returns of 1.79%, 1.47%, and 1.00%, respectively. On the other hand, REITs, Utilities, and Capital Goods were the worst performing sectors, posting returns of -1.54%, -1.17%, and -0.68%, respectively. At the industry level, railroads, wirelines, and media all posted the best returns. The railroads industry posted the highest return of 6.57%. The lowest performing industries during the quarter were healthcare REITs, health insurance, and office REITs. The healthcare REITs industry posted the lowest return of -5.04%.

The year concluded with strong issuance during Q4 after the very strong issuance during the first three quarters of the year. The $67.6 billion figure is the most volume for a fourth quarter in three years. Of the issuance that did take place during Q4, Discretionary took 25% of the market share followed by Financials at 22% share and Communications at 12% share.

The Federal Reserve did lower the Target Rate at the November meeting and the December meeting. There was no meeting held in October. That brings the current Fed easing cycle to 100 basis points in total cuts. They kicked off this cycle with a 50 basis point cut at their September meeting. The Fed dot plot continues to moderate for 2025 now showing only 50 additional basis points of cuts expected for the year. Market participants are forecasting a bit more aggressive Fed and are expecting 83 basis points in cuts for 2025.¹ After the cut at the December meeting Fed Chair Jerome Powell commented, “With today’s action, we have lowered our policy rate by a full percentage point from its peak and our policy stance is now significantly less restrictive.” Powell continued, “We can therefore be more cautious as we consider further adjustments to our policy rate.”² While the Fed is on track to continue cutting rates, they are looking for more progress on inflation before making another move lower. Further, at this juncture, the Fed is comfortable with the current state of the labor market.

Intermediate Treasuries increased 79 basis points over the quarter, as the 10-year Treasury yield was at 3.78% on September 30th, and 4.57% at the end of the fourth quarter. The 5-year Treasury increased 82 basis points over the quarter, moving from 3.56% on September 30th, to 4.38% at the end of the fourth quarter. Intermediate term yields more often reflect GDP and expectations for future economic growth and inflation rather than actions taken by the FOMC to adjust the target rate. The revised third quarter GDP print was 3.1% (quarter over quarter annualized rate). Looking forward, the current consensus view of economists suggests a GDP for 2025 around 2.1% with inflation expectations around 2.5%.³

Being a more conservative asset manager, Cincinnati Asset Management does not buy CCC and lower rated securities. Additionally, our interest rate agnostic philosophy keeps us generally positioned in the five to ten year maturity timeframe. During Q4, our higher quality positioning was a drag on performance as lower rated securities significantly outperformed. Further, Index performance was driven by maturity buckets of 3 years and shorter. Additional performance detractors were our credit selections within the capital goods sector and our underweight in the communications sector. Benefiting our performance this quarter were our credit selections in the banking sector, consumer products industry, and consumer cyclical services industry. Another benefit was added due to our underweight in the REITs sector.

The Bloomberg US Corporate High Yield Index ended the fourth quarter with a yield of 7.49%. Treasury volatility, as measured by the Merrill Lynch Option Volatility Estimate (“MOVE” Index), remains elevated from the 78 index average over the past 10 years. The current rate of 98 is well below the spike near 200 back during the March 2023 banking scare. The MOVE Index does show a general downward trend over the last two years. Data available through November shows 29 bond defaults during 2024 which is relative to 16 defaults in all of 2022 and 41 defaults in all of 2023. The trailing twelve month dollar-weighted bond default rate is 1.80%.⁴ The current default rate is relative to the 2.38%, 2.67%, 2.15%, 1.85% default rates from the previous four quarter end data points listed oldest to most recent. Defaults are ticking lower and the fundamentals of high yield companies are in decent shape. From a technical view, fund flows were positive in the quarter at $6.6 billion.⁵ No doubt there are risks, but we are of the belief that for clients that have an investment horizon over a complete market cycle, high yield deserves to be considered as part of the portfolio allocation.

The high yield market continues to hum along with positive performance and attractive yields. Corporate fundamentals are broadly in good shape, defaults have moved lower, and issuance remains robust. GDP still looks good. Three months back the labor market appeared a bit wobbly, but it has proved resilient. There are some concerns regarding the consumer, and the Fed is eyeing a bit of needed inflation improvement. Looking ahead, the new US administration should keep things interesting. The Fed is evaluating the impact of potential presidential policies but have not yet incorporated them into any decision making saying that it is “very premature.” In other words, the Fed is data dependent. Our exercise of discipline and credit selectivity is important as we continue to evaluate that the given compensation for the perceived level of risk remains appropriate. As always, we will continue our search for value and adjust positions as we uncover compelling situations. Finally, we are very grateful for the trust placed in our team to manage your capital.

This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results. Gross of advisory fee performance does not reflect the deduction of investment advisory fees. Our advisory fees are disclosed in Form ADV Part 2A. Accounts managed through brokerage firm programs usually will include additional fees. Returns are calculated monthly in U.S. dollars and include reinvestment of dividends and interest. The index is unmanaged and does not take into account fees, expenses, and transaction costs. It is shown for comparative purposes and is based on information generally available to the public from sources believed to be reliable. No representation is made to its accuracy or completeness. Additional disclosures on the material risks and potential benefits of investing in corporate bonds are available on our website: https://www.cambonds.com/disclosure-statements/.

Footnotes

Bloomberg January 1, 2025: World Interest Rate Probability

Bloomberg December 18, 2024: Powell Says Future Cuts Would Require Fresh Inflation Progress

Bloomberg January 1, 2025: Economic Forecasts (ECFC)

Moody’s December 16, 2024: November 2024 Default Report and data file

Bloomberg January 1, 2025: Fund Flows

14 Jan 2025

Insight, Investment Grade Quarterly CAM Team 0 comment

Q4 COMMENTARY & 2025 OUTLOOK

January 2025

It was a solid year for investment grade credit as most companies were able to expand revenues while maintaining healthy balance sheets. These feats were accomplished largely thanks to a U.S. economy that continued to grow. Investment grade posted positive returns during the full year 2024, but the 4th quarter of the year was underwhelming as Treasury yields moved higher which weighed on returns.

2024 Year in Review

During 2024, the option adjusted spread (OAS) on the Bloomberg US Corporate Bond Index tightened by 19 basis points to 80 after it opened the year at a spread of 99. Lower quality portions of the investment grade universe outperformed higher quality, as investors reached for yield amid a historic level of spread tightening. Intermediate credit outperformed longer duration credit due to Treasury yields moving higher throughout the year.

Spread and coupon performance carried the day for corporate bonds in 2024. As bond investors we measure “excess return” as the total return of a corporate bond minus the total return of the underlying government bond. Excess return for the Corporate Index was +2.46% for the full year 2024, more than the total return for that Index of +2.13%. This means that the underlying Treasury performance was negative (due to Treasury yields moving higher) and that corporate bonds were able to overcome this and post positive total returns thanks to spread tightening and the higher coupon income that is available in corporate bonds relative to Treasuries. Suitability is unique to each investor but for investors than can tolerate a modest amount of credit risk, 2024’s performance shows that portfolios can benefit by placing a preference on actively managed IG corporate bonds relative to just Treasuries alone.

The best performing industries in 2024 were Airlines and Finance Companies. Railroads and Other Industrial were the two biggest underperformers relative to the Index. The majority of industries posted positive total returns for the full year with just a handful of negative performers.

Interest rates were volatile during 2024, particularly in the intermediate and shorter portions of the yield curve. The 10yr Treasury ended 2024 at 4.57% after opening the year at 3.88%. Looking at the front end of the curve, the 2yr Treasury finished the year at 4.24%, which was just one basis point lower than where it ended 2023; but that does not tell the whole story of just how volatile this security was during 2024. The 2yr traded above 5% at the end of April and then as low as 3.54% in the days following the Fed’s first rate cut in the latter half of September. The 2yr then climbed to 4.24% at year-end as traders began to acquiesce to the Fed’s messaging about a more cautious path of its easing cycle and the belief that rate cuts may play out over a longer time than initially anticipated. The 5yr Treasury finished the year 53bps higher than where it began, but it traded within a range of a whopping 132bps. The 5yr traded near its low of 3.40% just prior to the September Fed meeting before moving higher during the final 3 months of the year, finishing at 4.38%.

Looking at the two charts pictured above, the most important takeaway for investors and active bond mangers is the fact that the 2/10 Treasury curve ended its 793-day inversion streak in early September. The curve had been inverted since July of 2022 and this was the longest period of inversion on record. While 2/10 inversion has typically been a harbinger of recession, thus far the U.S. economy has managed to stay on solid footing. Only once previously has an inverted yield curve failed to precede a recession, during the brief period of inversions surrounding the Russian ruble crisis in 1998. A steep curve is helpful to active managers allowing them to effect economic sale-and-extension trades while also exposing investors to the power of curve rolldown and its ability to magnify returns.

2025 Outlook

We have a favorable view of the potential for investment grade to generate attractive returns in the year ahead. The likelihood of additional spread compression is probably limited given the market is trading near the tight end of historical valuations. For us, much like we wrote at the end of 2023 and every quarter thereafter, it is the all-in yield that currently makes the asset class compelling on both an absolute and relative basis. The average yield on the Index over the past 10 years was 3.67% and it finished 2024 at 5.34%, which is higher from the end of 2023 when it was 5.06%.

On a relative basis, by one metric, equities are at their most overvalued versus corporate credit and Treasuries since 2008. A recent Bloomberg study compared the earnings yield on S&P 500 shares (3.7%) to the yield to worst of the Bloomberg BAA Corporate Index (5.6%), finding a gap of 190 basis points as of January 6, 2025.¹

The S&P 500 earnings yield is typically greater than the yield for corporate bonds to compensate investors for the additional risk associated with equities. It is worth noting that this is just one data point and this metric was negative for the entirety of the 1990s before turning positive in 2003. Still, we think that investors should take note of this development –high quality bonds screen cheap to other risk assets on a relative basis which suggests they may deserve a larger slice of an investor’s overall asset allocation.

Overall, investment grade credit metrics remained healthy in 2024 and are poised to follow a similar path in 2025. According to research compiled by Barclays, at the end of the third quarter 2024, net leverage for the Index was 3.0x, up 0.2x year over year and interest coverage was 11.7x, a deterioration of 1.3x from the prior year. Meanwhile, EBITDA growth was positive through the first three quarters of 2024 and EBITDA margins moved up a full percentage point over the past year to 30.6%, a new all-time high.² The best way to describe credit metrics as we head into 2025 is “stable” which is what we like to see. As an active manager with a relatively concentrated portfolio, we are less concerned with the overall universe and instead focus on a relatively small number of issuers that populate our investor portfolios.

Portfolio Positioning

We are consistent in our approach to portfolio management which means that we are not making wholesale changes to our strategy from one year or quarter to the next. We provide value to our investors by assembling customized separately managed accounts consisting of thoroughly-researched individual bonds. There are several tenets that our investors can count on with CAM’s Investment Grade Strategy:

Diversification: Each individual account is initially populated with approximately 20-25 positions. This results in a portfolio that is concentrated relative to the Index but still achieves sufficient diversification at the sector/industry levels. Each account is populated with our best ideas during an invest-up period that takes 6-8 weeks to complete which we refer to as an abbreviated economic cycle.

Overweight High Quality: CAM targets a cap for each account at a 30% exposure to BAA-rated bonds, which represent the riskier portion of investment grade universe. The Index had a 47.66% weighting in BAA-rated credit at the end of 2024.

Intermediate Maturity: We will always seek to position the portfolio within an intermediate maturity band that ranges from 5-10 years, although we may occasionally hold bonds shorter than this if warranted by market conditions. At year end 2024 our composite had a modified duration of 5.49 relative to the Index duration of 6.98.

The above framework helps us achieve the goal of our process which is to provide a customized portfolio with a return that is as good or better than the Index while incurring less volatility and prioritizing preservation of capital.

The biggest “change” of note in 2024 was more of a normalization than a pivot in strategy. We have benefited from the aforementioned re-steepening of the yield curve and its impact on our ability to engage in economic sale-and-extension trades. Simply put, it has been much more attractive for us to execute these trades thus allowing our portfolio turnover to rebound to levels more consistent with historical averages. Those investors that have been with us for a number of years have likely noticed this activity; those that have been with us for 2 or 3 years are likely to see an increase in sale activity in 2025 if market conditions remain copacetic.

As we look ahead to 2025, we are actively avoiding individual companies with exposure to geopolitical destabilization and we continue to have no exposure to leisure, lodging, restaurants or gaming. We also have a significant underweight on retailers.

FOMC Taking a Deliberate Approach

The Fed delivered 100bps of rate cuts in 2024, occurring across 3 meetings in the final 3.5 months of the year. The overarching theme of the moment is forward expectations for the path of easing, as the Fed has been careful to dial back its stance on future cuts amid sticky inflation, strong consumer spending and a resilient labor market. With the December FOMC meeting came the quarterly update of the Fed’s ballyhooed “Dot Plot” showing a median estimate of two rate cuts in 2025, down from the four previously projected in the September release. The December FOMC meeting minutes were released on January 8, showing the nuts and bolts of the Fed’s cautious view of the year ahead:
“In discussing the outlook for monetary policy, participants indicated that the Committee was at or near the point at which it would be appropriate to slow the pace of policy easing” and “In addition, many participants suggested that a variety of factors underlined the need for a careful approach to momentary policy decisions over coming quarters.”³
We think that the Fed is taking a prudent approach, especially with the amount of uncertainty from the incoming Trump administration on trade, tariffs, immigration, taxes and foreign policy. The Fed always has the option to reverse course and cut its policy rate more aggressively if the economy slows.

A Year of Opportunity

As we have written before, when it comes to interest rates, “higher for longer” is not negative for bond investors. Clipping coupons in excess of 5% for healthy IG-rated companies is an attractive value proposition. However, we believe that higher rates will continue to weigh on certain sectors of the economy such as housing and have an outsize impact on small businesses which are critical to the health of the U.S. economy. At the end of 2023 we wrote that we thought a recession was likely in 2024 or sometime in 2025. Obviously, that has not come to fruition and while sticking with that call would be deeply out of consensus, we continue to forecast a reasonable chance of recession. One scenario that could land us there is if the economic backdrop deteriorates and the Fed is too slow to react. Other recession scenarios could be borne out by geopolitical issues or by the unintended consequences of political policies or the growing U.S. deficit. We are inherently cautious in the face of these uncertainties. Preservation of capital is at the forefront of our investment grade strategy so we are always positioning the portfolio to mitigate the impact of economic downturns. At the end of the day, investing is always about being appropriately compensated for risk –in the current environment we view the modest compensation for incremental risk to be insufficient. We will continue to focus on blocking and tackling while populating investor portfolios with companies that can persevere in a variety of economic environments.

Thank you for your continued interest and support. We wish you all the best in 2025 and look forward to a successful year.

This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results. Gross of advisory fee performance does not reflect the deduction of investment advisory fees. Our advisory fees are disclosed in Form ADV Part 2A. Accounts managed through brokerage firm programs usually will include additional fees. Returns are calculated monthly in U.S. dollars and include reinvestment of dividends and interest. The Index is unmanaged and does not take into account fees, expenses, and transaction costs. It is shown for comparative purposes and is based on information generally available to the public from sources believed to be reliable. No representation is made to its accuracy or completeness.
The information provided in this report should not be considered a recommendation to purchase or sell any particular security. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed do not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings. It should not be assumed that any of the securities transactions or holdings discussed were or will prove to be profitable, or that the investment decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein.

Additional disclosures on the material risks and potential benefits of investing in corporate bonds are available on our website: https://www.cambonds.com/disclosure-statements/

Footnotes

Bloomberg News, January 7 2025 “Credit Markets Signal Warning for a Relentless Equity Rally”

Barclays Bank PLC, December 16 2024 “US Investment Grade Credit Metrics, Q3 24 Update: Likely Peaked”

FOMC Federal Reserve System, January 8 2025 “Minutes of the Federal Open Market Committee: December 17-18, 2024”

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