BRAMSHILL BLOG:  From the Desk of Bramshill Investments

July was a solid month for the Bramshill Income Performance Strategy which returned +1.09% on the month and has now returned +3.11% YTD. In July, we maintained a conservative position both in terms of credit and rate risk. Our duration on the Strategy has remained moderate at approximately 2.4 years. 

This is because the treasury market, with a severely inverted yield curve, has seemed at odds with most risk markets which have been largely rallying and embracing a soft landing economic scenario. While the Fed seems to be nearing the end of its tightening cycle, there has been little incentive to take duration for most of this year. Thus, we have chosen to collect very attractive yields on the Strategy (currently 6.62% YTM and 6.36% YTW) with short duration characteristics until the treasury curve “normalizes”. In late July, the curve began to “disinvert” by bearish steepening. We will closely watch these developments in the weeks and months ahead. In July, our preferred allocation increased modestly to approximately 29% of the Strategy. We added a new position in AXP 3.55% PFD trading at approximately $83.50, which yields 9.9% to ’26 call or the coupon will reset after the call date to T5+285. We also added new position in WFC 5.9% PFD at approximately $98.75 yielding 7.5% to ’24 call. This preferred will reset to a fixed rate of 9.01% if not called after 2024. Additionally, we added to an existing position in C 7.375% PFD which we have highlighted in previous commentary. We moderately decreased our investment grade corporate allocation to 13% of the Strategy as we pared our exposure in an AT&T baby bond and one utility credit both of which were trading fairly tight in spread and yield. We maintained a stable allocation of approximately 8.5% to municipal CEFs, which are currently still attractive as they are trading at 12-14% discounts to NAV. However, our caution in this market is related to the interest rate risk inherent in such positions (highlighted above). Our enthusiasm for municipal CEFs will likely increase once we become more comfortable with duration. Our high yield corporate exposure remains approximately 8% of our portfolio as the spread on the high yield index of +425 over the treasury curve is unattractive in our opinion. Our short-term treasury allocation stands at approximately 40% of the Strategy and yields approximately 5.4% at this time. We expect to re-invest our liquidity during such times of dislocation and volatility. You should expect us to allocate portions of this liquidity in the coming months as we have in past disruptive periods.