Performance

In May, the U.S. Treasury market exhibited considerable volatility, shaped by shifting fiscal expectations, evolving trade policy developments, and central bank signals. The 10-year yield moved within a relatively wide range (4.16%–4.6%), ultimately closing the month higher at 4.4%. Sentiment was swayed by key geopolitical developments, particularly the temporary easing of U.S.-China tariffs and renewed trade dialogue, which helped support markets. Meanwhile, the Federal Reserve reinforced its patient stance, dampening expectations for imminent rate cuts. Optimism grew following tariff de-escalation efforts and softer inflation data, though persistent concerns about the durability of trade agreements and fiscal discipline tempered the broader market tone. The Fund posted a 0.9%* return for May. Economic data for May pointed to a broadly softening backdrop. Inflation continued to ease, with CPI rising just 2.3% year-over-year, the lowest in four years, and PPI falling by 0.5%, its largest drop since 2009. Core CPI remained elevated at 2.8%, but disinflation trends were evident in other measures, including a 0.1% month-over-month rise in both headline and core PCE. Retail sales growth stagnated, and durable goods orders dropped 6.3%, while core capital goods orders fell 1.3%, signaling growing caution in business investment. Revised Q1 GDP showed a modest contraction of -0.2%. Meanwhile, the U.S. House passed a major tax bill expected to significantly widen the fiscal deficit, prompting Moody’s to downgrade the U.S. credit rating. However, the bill is likely to undergo significant changes as it moves through the Senate. We made no new trades in May, apart from processing a minor redemption. Our current investment strategy remains focused on keeping the Fund fully invested. As of the end of the month, the Fund maintained an average duration of 5.3 years and an average yield-to-maturity of 6.61%. * Net performance, B1 shares.