The economic backdrop was generally supportive of higher rates as well. U.S. equities closed a stellar year with another strong quarter to reach all-time highs, and overall inflation expectations as reflected in Treasury Inflation-Protected Securities (TIPs) prices increased. U.S. non-farm payrolls came in above expectations despite a partial government shutdown to start the quarter that impacted government jobs, while the unemployment rate fell to 7.0%. Third-quarter Gross Domestic Product (GDP) growth was revised upward to 4.1%, well ahead of initial estimates of 3.6%, thanks to inventory growth and a boost in consumption.
The Funds return of -0.74% for the quarter modestly underperformed its benchmark. Our overweighting of mortgage-backed securities represented a slight detractor from overall performance, although we reduced the overweight during the quarter. The Funds positioning along the yield curve and overall stance with respect to portfolio duration also had a marginally negative impact on performance.
If you're a conservative investor who prefers the income and quality assurance offered by government securities, you may find this Fund attractive. It is best suited for investors with relatively low-risk profiles and can provide a solid-core holding for income-oriented investors of all ages.
- Invest primarily in securities issued or guaranteed by the U.S. government or by its agencies.
- Select high-quality securities with maturities, under normal circumstances, between one and 10 years, with risk exposure managed in an effort to achieve reasonable returns.
- Buy and sell securities using a relative value approach that employs models that analyze and compare expected returns and assumed risks.