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Over the second quarter of 2025 the LOM Fixed Income Fund rose 1.15% as intermediate-term bonds reversed course and rallied towards the end of the period. Over the past year, the Fund provided a total return of 4.73%.
Global macroeconomic activity in Q2 was shaped by a mix of resilient consumer spending, persistent inflation and heightened geopolitical tensions. In the U.S., GDP growth remained positive but decelerated from the robust pace seen in late 2024. The Federal Reserve maintained its policy rate in the 4.25%–4.50% range, citing sticky core inflation, tariff uncertainty and a still-tight labor market. Meanwhile, consumer confidence wavered slightly in June amid concerns over rising energy prices, driven in part by the conflict in the Middle East, which also contributed to increased market volatility and a brief spike in crude oil prices.
In fixed income markets, uncertainty on tariff positions generated significant volatility early in the quarter. In April, the 10-year US Treasury bond yield spiked to almost a 4.60% as the market became concerned about the longer-term economic impacts of tariff policies before drifting down later in the period.
Corporate spreads initially widened on tariff announcements given the potential impact to their business models and the credit risk from importation duties. With the 90-day pause put into place there was some normalization, with the market settling around 1.10% above government debt, though this continued the move away from a 2024 market of spreads averaging closer to 0.80%.
The macro outlook has continued to shape the market with compression of shorter-term yields in anticipation of Fed policy cuts, but with higher yields on longer borrowing. The 30-year market hit 5.10% before drifting back under 4.90% despite the continued concern about the potential impact of the US debt level. The US debt level continues to be a major debating point across Washington, but a concrete move came from Moody’s, the ratings agency, who downgraded their rating to Aa1 from Aaa with a negative outlook given their view of continued rising annual fiscal deficits.
In this environment, we continue to invest selectively and opportunistically in investment grade bonds. We are also maintaining our approximately ten percent position in hybrid securities paying up to 7% on a current yield basis.
The information contained in this article is for information purposes only, and represent the views of the author. It is not intended as specific investment or financial advice, or a recommendation or solicitation to buy or sell any security. Any investments or strategies listed in this article may not be suitable for all investors. Past performance is not indicative of future performance, and as with any investment, prices may fluctuate. It is recommended that advice is sought from a qualified investment professional prior to implementing any financial plan. LOM has made every effort to ensure that the contents herein have been compiled from sources believed reliable, however LOM does not warrant the accuracy, adequacy, timeliness, or completeness of this information expressly disclaims liability for errors or omissions in this information.
