Summary

• From late-February, the war in the Middle East dominated much of the news flow and financial market sentiment, initially seeing a traditional risk-off move in both the US dollar and US bonds.
• Security selection by sector lifted relative performance over the period, led by selection in the insurance and banking sectors.
• Yield curve positioning lifted returns for the quarter due, in part, to an underweight position in bonds with 2 years to maturity.
• Investment-grade corporate bond spreads have moved tighter year-to-date, driven by investor demand for historically attractive yields and diminished market concerns regarding US trade policies.
• Franklin Templeton maintains a neutral stance on IG credit while highlighting potential concerns on current valuation levels.

Key Takeaways

• Markets: From late-February, the war in the Middle East dominated much of the news flow and financial market sentiment. The reaction in markets has evolved, initially seeing a traditional risk-off move in both the US