High Grade Review and Outlook 1st Quarter 2015
The commentary reviews the previous quarter and discusses our outlook and investment approach for the next quarter for our high quality taxable fixed income strategies for endowments, foundations and other non-taxable entities.
- US interest rates continued to fall in the 1st Quarter, influenced by negative European rates as the ECB began its bond buying program, as well as expectations that a Fed tightening is looking further in the future.
- Outperformance within our strategies was generated through an overweight to corporate spread sectors, an out of benchmark allocation to TIPS, and a longer duration to benefit from roll-down return.
- The Fed Board remains committed to keeping monetary policy accommodative, while keeping their large balance sheet and any rate hikes being spread out and data dependent.
- We continue to see value in corporate bonds as the economy continues to improve, municipal bonds as ratios to Treasuries are well over 100%, and TIPS as the Fed remains committed to edging inflation higher.