Language | 
English
Spanish
Over the fourth quarter of 2021, the LOM Fixed Income Fund USD gained +1.29% 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 -0.80% decrease in the Citi Corporate and Government 1-5 Year Index.
On a one-year basis, the Fund increased in value by 2.90% compared to a -0.90% decrease 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 U.S. Treasury yield curve flattened during the last quarter, with short-term and medium-term yields moving up while long-term yields moved down slightly. Credit spreads widened; the spread between BBB corporate bonds and the ten-year Treasury ended the year at 1.2%, higher than the beginning of the year, but still below pre-pandemic lows.
In December, Fed chairman Jerome Powell dropped the word “transitory” from his inflation view and acknowledged that high inflation could persist well into 2022. Policymakers shifted to a more hawkish policy in their December FOMC meeting. The committee decided to double their pace of tapering to $30 billion a month.
After this change, the Fed’s quantitative easing program will end entirely in March instead of June 2022. Ending the assets purchases earlier paves the way for faster rate hikes. According to the latest FOMC dot plot, there will be at least one rate hike in the new year. The median projection forecasts three rate hikes in the New Year.
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.
