Summary
- Market Backdrop: While Q2 appeared calm at a surface level, markets experienced meaningful intra-quarter volatility following President Trump’s tariff announcement and subsequent 90-day pause.
- Rates & Volatility: Risk assets sold off early in the quarter, with the 30-year Treasury yield briefly exceeding 5% before markets stabilized.
- Performance Drivers: The Johnson Core Fixed Income Strategy benefited from several tailwinds, led by an emphasis on corporate bonds and the tactical addition of credit exposure during April’s spread widening.
- Yield Curve Impact: Although duration was not a significant contributor, a meaningful steepening of the yield curve supported relative results.
- Positioning Effect: An avoidance of 30-year bonds and a more intermediate key-rate duration profile added value during the quarter.
- Outlook: With credit spreads historically tight, further tightening may be limited. The strategy remains defensively positioned on the long end of the curve, with expectations for continued steepening amid macro and policy uncertainty, while maintaining a focus on steady, consistent returns.
Video Transcript
Hello, I’m Brandon Zureick, Senior Managing Director and Fixed Income Portfolio Manager.
From point to point the second quarter seemed relatively uneventful.
Looking deeper, however, we’re reminded of meaningful intra-quarter volatility.
The quarter began with a sharp risk asset selloff following President Trump’s Liberation day tariff announcement.
Bond yields reacted as well, with the 30 year Treasury yield briefly topping 5%.
Calm was quickly restored to markets, however, as the president announced a 90 day pause on most reciprocal tariffs.
The Johnson Core Fixed Income Strategy benefitted from several tailwinds to relative performance throughout the quarter.
The primary driver of the strategy’s relative outperformance during the second quarter was its emphasis on corporate bonds.
This was further enhanced by the tactical addition of credit weight during April’s spread widening.
While duration was not a meaningful performance driver, yield curve structure played an important role last quarter as the yield curve steepened quite meaningfully.
The strategy’s avoidance of 30 year bonds, and it’s more intermediate focused key rate durations were added benefits throughout the second quarter.
As we look forward to the second half of the year, spread tightening looks more limited given the historically tight levels across credit markets.
While duration will be highly influenced by macroeconomic and policy driven events, we believe the yield curve is likely to continue to steepen and maintain a defensive positioning to the long end of the yield curve.
As always, we remain committed to driving steady and consistent returns, especially in the face of market volatility and uncertainty.
Should you have any questions please contact a member of the Johnson Asset Management team.
Published 07/22/2025
Johnson Asset Management (JAM) is a division of Johnson Investment Counsel, Inc. (“JIC”), an independent and privately owned Midwestern based investment advisory firm registered with the Securities and Exchange Commission. Johnson Asset Management manages institutional separate account portfolios for a wide variety of for-profit and nonprofit organizations, public agencies, public and private retirement plans, and personal trusts of all sizes. It may also serve as sub-adviser for mutual funds. JIC’s fees are available upon request and may be found in our Form ADV Part 2A. Performance data quoted herein represents past performance. Past performance does not guarantee or indicate future results. All data is current as of March 31, 2025 unless otherwise noted. Returns and net asset value will fluctuate. To determine if this strategy is appropriate for you, carefully consider the investment objectives, risk factors, and expenses before investing. Individual account management and construction will vary depending on each client's investment needs and objectives. Investments employing JIC’s strategies are NOT insured by the FDIC or by any other Federal Government Agency, are NOT Bank deposits, are NOT guaranteed by any Bank or any Bank affiliate, and MAY lose value, including possible loss of principal. Johnson Asset Management claims compliance with the Global Investment Performance Standards. The Institutional Core composite includes all fee paying, fully discretionary, actively managed institutional fixed income portfolios with a minimum value of $500,000 and an investment objective of broad investment grade, taxable fixed income, benchmarked against the Bloomberg U.S. Aggregate Index. The US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar denominated, fixed-rate taxable bond market.
JAM’s policies for valuing portfolios, calculating performance and preparing compliant presentations, as well as a complete list of composite descriptions are available upon request. Please contact our office at 513.389.2770 or 3777 West Fork Road, Cincinnati, OH 45247. All returns reflect the reinvestment of investment income (dividends and/or interest) and capital gains. Valuations and returns are stated in U.S. dollars. Trade date accounting is used. Portfolio returns are calculated using time weighed return methodology on a monthly basis. Net returns shown reflect gross performance less the highest fee schedule for this strategy. Actual client returns would also be reduced by brokerage commissions, custodial fees, and other client paid expenses detailed in JIC’s Form ADV Part 2A.
