BMO Strategic Fixed Income Yield Fund – Biweekly Update
May 9, 2025
Portfolio Manager Commentary
Rates markets continue to remain cautious with rates inching lower over the last few weeks until a stronger than expected non-farm payrolls print on Friday May 2 turned the sentiment around. Although new jobs growth showed a slowing pace, market expectations of a faster slow down did not come to fruition, resulting in a pull back to the rates rally. Additionally, optimism on US trade negotiations have started to add to risk on sentiment. Previously market had over 100bps of fed cuts priced for 2025 and post these headlines, market is inching closer to 3 cuts instead of 4. Forward guidance out of the fed should be taken with a grain of salt. Data points more towards slower growth but inflation remaining sticky, so the fed’s dual mandate focusing on growth and inflation has them pulled both ways.
Trade policy globally still remains fluid and the PM’s remain cautious as a result, keeping a slightly higher cash buffer and opportunistically deploying on rates pull backs and volatility spikes. A short period of time with an extra cash buffer also acts as a NAV stabilizer in times of market distress, and the BMO Strategic Fixed Income Yield Fund (SFIYF) volatility has been lower than the fund benchmark. 2s30s steepener continues to perform hitting highs of 48bps over the previous two weeks (from 30bps prior). Treasuries remain balanced, but skewed to rallying. New trades with similar coupons to the existing fund can be entered into with buffers in the 130bps level given the volatility. The fund continues to perform with 115bps buffer on the rates upside. Business uncertainty continues with US market awaiting Apr and May economic numbers over the next months to see if dwindling business confidence shows through to growth, and we have yet to see how this uncertainty will impact lending and corporate credit. What will be particularly interesting to watch is how dwindling global appetite for US assets will impact US corporate credit going forward. Despite the credit uncertainty, SFIYF continues to accrue and pay out 6% annualized coupons. SFIYF remains a good diversifier from traditional credit indices while still maintaining a similar enhanced coupon.
Fund Snapshot
| Contingent Coupon | Credit Rating |
|---|---|
| 6.0% | A |
| Average distance from the tops of the range | 115bps |
Fund Characteristics
| Series | Fund Codes | MER (%)* |
|---|---|---|
| Advisor (CAD) | BMO99341 | 1.07 |
| F (CAD) | BMO95341 | 0.51 |
| **Low risk rating by prospectus. |
Total Return Volatility
| Security Name | 30 Days | 90 Days | 180 Days |
|---|---|---|---|
| BMO Strategic Fixed Income Yield Fund | 4.91% | 6.28% | 5.95% |
| iBoxx USD Liquid High Yield Index TR | 7.45% | 4.92% | 3.92% |
| iBoxx USD Liquid Investment Grade Index TR | 9.85% | 7.48% | 7.14% |
| Bloomberg US Agg Total Return Index | 6.35% | 5.20% | 4.99% |
Source: Bloomberg. May 6, 2025. Historical volatility doesn’t tell you how volatile a Mutual Fund will be in the future and will change based on market conditions.
US Government Yield Curve
Source: Bloomberg, May 6, 2025.
Reference Asset Exposure
Source: Bloomberg, May 6, 2025.
Yield vs. Contingent Coupon
BMO Strategic Fixed Income Yield: Yield reflects the contingent coupon of the structured rate swaps.
Volatility is a measure of performance and this triggers standard performance data requirements. Performance data as of April 30th 2025"
1 mo |
3 mo |
6 mo |
YTD |
1 yr |
SI |
|
BMO Strategic Equity Yield Fund Class A |
-0.95 |
-2.89 |
-3.05 |
-1.82 |
2.26 |
4.58 |
1 mo |
3 mo |
6 mo |
YTD |
1 yr |
SI |
|
BMO Strategic Equity Yield Fund Class F |
-0.86 |
-2.62 |
-2.52 |
-1.47 |
3.41 |
6.88 |
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