Monthly Bond Commentary - December 2025

Despite the many global problems of 2025, I am pleased to announce that the performance of all the portfolios we manage was extremely successful with all beating their benchmarks. They have also beaten the performance of the Pimco Total return Fund.

With the continuing war in Ukraine, the ever-changing Trump tariffs, the Israeli-Hamas war, global inflation still proving sticky, and now the Venezuelan situation, making investment choices difficult, we will continue to hold broadly the same investment views into 2026 –at least for the start of the year. Our overarching view, that we have held for some time, is that government bank rates will be reduced over time. The problem has been that, while rates have indeed fallen, it has been a lot slower than envisaged. Whilst acknowledging Japan has just raised its rates to a 30-year high and the ECB is expected to hold its current 2% rate all this year. After cutting in December, it seems likely that the BOE will cut at least one more time this year. In the US, it is more likely that there will be more rate cuts, with some forecasting a near 3% rate by the end of the year, from the 3.5% to 3.75% rate today. Since US interest rates are likely to decline further, we believe the yield curve is likely to remain steep, therefore we will maintain our current portfolio durations.