TCW High Yield Bond ETF Q2 2025 Commentary

2025-09-10 11:37:00 ET

Review – “In Like a Lion, Out Like a Lamb(orghini)”

When all was said and done for the second quarter in the markets, it was hard not to think of the old saying about March weather as both apt and ready for wordplay. The lion roared on the April 2 Trump Administration tariff announcements, delivering sharp downturns in both rate and risk markets immediately thereafter, before implementation reprieves were offered, ushering in the lamb as April rolled on. Accelerating the risk market recovery like the Lamborghini was better- than-feared macroeconomic data, driving increased risk appetite. With measured inflation showing no meaningful impact from trade policies to date, several key Federal Open Market Committee (FOMC) members hinted at a sooner- rather-than later resumption of rate cuts, spurring a steepening of the yield curve as investors priced in a more active FOMC. In total, the 2-Year yield fell by 16 basis points (bps), the 10-Year was roughly unchanged (+2 bps), while 30-Year yields increased by 20 bps given the re-emergence of concerns surrounding the budget deficit. However, much like the easing of anxieties from the initial tariff shock and dismissal of any potential fallout from the quarter’s geopolitical flare ups, these budget concerns were not ultimately reflected in ending risk asset valuations as the market proved adept at navigating through the stormy skies of event-driven volatility....

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