BRAMSHILL BLOG:  From the Desk of Bramshill Investments

October was a challenging month for US fixed income as 10 year treasury yields increased approximately 50 bps in anticipation of a change in the US administration. The Bloomberg US Aggregate Index returned -2.48% on the month.

However, the Bramshill Income Performance Strategy outperformed most US fixed income benchmarks, returning -1.60% on the month and is now up +4.21% YTD (outperforming the Bloomberg US Aggregate Index by 235 bps YTD). The Strategy outperformed because of our conservative positioning leading into the US election season. In previous commentary, we noted that we had increased our cash and short-term treasury allocation to 21% of the Strategy. This was due to our opinion that spreads were not compensating investors for potential volatility heading into a US election with a binary outcome. Although the US Federal Reserve has continued to signal a bias toward reducing rates, the market has speculated a Republican administration would signal an impetus for stronger economic growth and potentially inflation. We made very few changes to the portfolio in the month of October. Within investment grade corporate bonds, we slightly increased our allocation from 31% to 32% of the Strategy. We reduced our position in BNC 6.35% which had performed very well in recent months and added moderately to our low dollar price, long duration corporate positions, in a number of credits which had backed up recently with the selloff in long treasuries. We also added a short duration position in BAC. We maintained our approximate 23% in Preferred securities. We continued to take profits in ALLY 4.7% PFD, but otherwise largely kept our exposure unchanged because of the relative price stability of our positions. Predominantly, our preferred positions remain in $1000 par securities which are callable with onerous step-up features (as highlighted in our Bramshill Insights piece, see Announcements section for details). We reduced our allocation to the high yield corporate asset class from approximately 9% to 7% as spreads are now approaching 2007 tights. In particular, we sold a portion of our allocation in a short duration high yield ETF. The Strategy’s exposure to the municipal asset class remains at approximately 2%. While discounts to NAV, are at the tight end of YTD ranges, we continue to hold CEFs with the highest liquidity profile. We believe the current rate-cutting environment is favorable and we will view any selloffs in rates or credit as an opportunity to deploy capital. However we would like to await some more clarity around fiscal policy in the weeks and months ahead.