Performance

Throughout September, U.S. Treasury yields followed a mixed but ultimately downward trajectory, reflecting evolving expectations around Federal Reserve policy amid weakening labor data and easing inflation pressures. The month opened with a yield uptick driven by global rate pressures and thin liquidity, but sentiment quickly shifted dovish following softer-than-expected U.S. macro data. Risk appetite further eroded toward month-end due to rising concerns over a U.S. government shutdown. Against this backdrop, the Fund delivered a solid return of 1.7%* for the month. Key macroeconomic indicators reinforced the narrative of a slowing U.S. economy. The August payrolls report showed a modest gain of 22k jobs versus 75k expected, while the unemployment rate rose to 4.3%. Inflation data remained moderate: PPI softened and CPI met expectations, supporting a “soft landing with easing bias” narrative. Jobless claims edged higher, and earlier employment data were revised down, adding to signs of labor market cooling. The Fed’s mid-September 25 bp rate cut, characterized as precautionary, briefly lifted yields, but the trend resumed lower. By late September, yields drifted lower again as a combination of renewed risk aversion due to U.S. government shutdown which officially started as of October, 1. Overall, September reinforced the view of a gradually slowing U.S. economy, with market pricing now tilted toward further policy easing, benefiting long-duration assets and supporting total returns across global fixed-income markets. In September, we sold several higher-yielding positions to help limit potential downside risk to the Fund’s performance, while the overall market environment remained constructive. Our investment strategy continues to focus on keeping the Fund fully invested, targeting bonds with credit ratings of BBB and above and an average duration of 4–7 years. As of month-end, the Fund maintained an average duration of 5.9 years and an average yield-to-maturity of 5.7%. * Net performance, B1 shares