LOM Fixed Income Fund Manager’s Report Q3 2021

Over the third quarter of 2021, the LOM Fixed Income Fund USD gained +0.47% as intermediate and longer-term interest rates and credit spreads stayed relatively stable while coupons were paid and accrued during the period. This quarterly return compares favorably to the +0.12% increase in the FTSE USBIG Government/Corporate bond index, the Fund’s benchmark. 

On a one-year basis, the Fund increased in value by 4.30% compared to a 0.29% increase in the benchmark. Many of our holdings benefitted from steadily improving credit spreads and the strong relative performance of our hybrid securities. 

In fixed income markets, the Treasury yield curve largely remained the same as during the previous quarter, with the belly of the curve moving up a few basis points. Credit spreads were stable during the second quarter; the spread between BBB corporate bonds and the ten-year Treasury has remained at around 1%., which is the lowest in the last 20 years. 

During the July and the September FOMC meetings, policymakers unanimously voted to maintain the Fed Fund Target Rate at the zero to 25 basis point range. According to the latest FOMC dot plot, officials are now evenly split on whether the central bank should raise rate next year. 

The median projection indicates that the first interest rate hike will be in 2023. Fed chairman Jerome Powell has changed his narrative on the quantitative easing program this summer, opening doors to commence tapering as soon as the end of this year, subject to economic conditions. 

Download the PDF report here.

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.