Summary

• As the quarter progressed, geopolitical developments increasingly overshadowed the macro narrative, culminating in a late-February escalation in the Middle East that materially altered market expectations through quarter-end.
• Retaliatory strikes affecting Qatar's liquefied natural gas infrastructure impaired a meaningful share of global LNG export capacity, pushing natural gas prices materially higher and reintroducing inflation concerns.
• The TCW MetWest Total Return Bond Fund I-Class gained 0.02% (net of fees) in the first quarter of 2026, finishing 6 bps ahead of the Bloomberg U.S. Aggregate Bond Index.
• Relative outperformance was attributable primarily to sector allocation decisions, highlighted by an overweight to residential MBS, which remained favored given still-attractive spreads relative to other high-quality segments.
• TCW views the dramatic rise in rates and hawkish repricing of the Fed as overdone and has positioned the portfolio accordingly, with a modest duration overweight and continued emphasis on the shorter end.

Market Review

Having entered 2026 with markets continuing to digest the effects of late-2025 policy easing and gradually moderating inflation, the first quarter unfolded in two distinct phases. Early-quarter trading was relatively orderly, supported by still-resilient economic data