The DoubleLine Fixed Income Briefing for the first quarter of 2025 highlights broad positive performance across fixed income markets despite macroeconomic volatility. Falling U.S. Treasury yields supported returns, though credit spreads widened. Yield levels remained elevated relative to recent history.
Treasury yields fell across the curve, and the curve steepened, as front-end yields came down more than long-end yields. Agency mortgage-backed securities (MBS) outperformed Treasuries, benefiting from strong demand and attractive relative value. Corporate credit posted positive returns but underperformed Treasuries, as investment grade, high yield and bank loan sectors were negatively impacted by spread widening over the period.
Non-Agency residential MBS remained a relative safe haven amid corporate credit uncertainty, supported by rising home prices and low defaults. Non-Agency commercial MBS also performed well, aided by stabilizing property prices and strong issuance, though risks around tariffs persist. Asset-backed securities (ABS) marked strong demand and positive returns, with caution noted around rising subprime delinquencies. Hard-asset ABS and aviation-related deals strengthened. Collateralized loan obligations posted positive but modest returns relative to fixed-rate bonds, with senior tranches offering attractive opportunities.
Emerging markets fixed income returns were positive, with corporate bonds slightly outperforming sovereign bonds.
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