Although longer-term treasury yields ended 2Q24 up only 20bp from 1Q24, intra-quarter the 10-year treasury hit 4.70% (up 50bp) before rallying to end the quarter at 4.40%. Shortterm yields were similarly volatile with the 2-year treasury increasing from 4.62% to 5.04% before ending the quarter at 4.75%. While consensus seems to be forming around 2 fed rate cuts, beginning September, recently rates have been somewhat volatile as the market is handicapping the economic impact of a new administration.
During June, DVDN maintained 18 total positions as allocation to Commercial REITs increased to 8 names and 37% of AUM, from 5 names and 9%, respectively, from May. Residential REITs decreased to 10 positions, from 11, and 63% of AUM. DVDN eliminated exposure to BDCs as it expects 2Q24 results will reflect lower marginal ROEs from tighter lending spreads, and potentially weaker credit.
For further details, please see our June 2024 Newsletter here.
After increasing 80 basis points from year-end 2023 through 4/30/24 (from 3.88% to 4.68%), the 10-year treasury yield declined 18 basis points during May 2024 (from 4.68% to 4.50%). The yield curve continues to be a battleground with the short-end now discounting 0-3 fed rate cuts while the long-end buffets between a soft (no recession) and hard (recession) landing for the economy.
During May, increased total positions to 18 from 14 as it added 4 “special situations” with three residential mortgage REITs and one commercial mortgage REIT. Among the residential REITs, one company completed a debt restructuring that improved its capital structure allowing it to commence investing and a second company that continues to make progress in earning its current dividend. Among the commercial REITs, DVDN added one company invested in multifamily assets that is performing well and would seem to be in a position to increase its dividend.
For further details, please see our May 2024 Newsletter here.
