New York, NY – The Treasury market faced increased volatility in the second quarter of 2024 as investors speculated on potential interest rate cuts by the Federal Reserve. This led to fluctuations in the 10-year Treasury yield, which ranged from a high of 4.705% to a low of 4.222% during the quarter. Despite the uncertainty, yields only experienced a slight uptick compared to the beginning of the quarter. Notable changes were seen in the 2-year Treasury, which saw a 12.2 basis points increase to 4.743% by June 25, 2024. The 10-year and 30-year Treasuries finished the quarter with modest gains of 4.7 basis points to 4.249% and 3.5 basis points to 4.378%, respectively.

Following a two-year downward trend, the spreads on investment-grade corporate and taxable municipal bonds stopped declining. As of June 25, 2024, the spread on the Bloomberg US Corporate Bond Index rose by 1 basis point to +93, while the spread on the Bloomberg Taxable Muni US AGG Index increased by 4 basis points to +82. With the belief that potential upside in these securities has largely been realized, adjustments have been made to reduce exposure to these bonds and increase allocation to Treasuries. Anticipating further spread widening, there are plans to reinvest in these securities later in the year.

Looking ahead to the third quarter of 2024, close attention will be paid to economic indicators, particularly inflation. Long-term projections suggest a decrease in interest rates, with expectations of rate cuts by the Federal Reserve in the latter half of the year. To align with this outlook, exposure to Treasuries will gradually increase over time, while maintaining flexibility through higher liquidity levels. A conservative credit approach will be balanced with opportunistic investment strategies as attractive opportunities arise, ensuring strategic adjustments are made accordingly.

As the financial landscape evolves, strategic decisions will be guided by a comprehensive analysis of market conditions and economic trends. With a focus on maintaining a balanced portfolio, investors will navigate uncertain waters by staying informed and adaptable. By closely monitoring developments and seizing opportunities as they arise, a resilient investment strategy will be forged to weather challenges and optimize returns in the ever-changing financial environment.