Commentary

At the beginning of March, the committee’s outlook was for a very strong U.S. economy and sticky inflation well above the Fed’s 3% target. While the committee continues to believe this is the case, the ongoing Iran conflict has created large market moves that require a reaction.

The Index is shifting to neutral duration from 90% relative duration to the benchmark. Driving this move has been a large rise in yields across the curve as the Iran conflict drives oil prices near $100 barrel.

The committee’s focus remains on the opening of the Strait of Hormuz. If/when tanker transit normalizes and crude reacts with lower prices, this would signal that the worst has passed. Thus, as investors anticipate more inflation from higher crude prices (and thus retail gas prices), we view 10-year yields above 4.25% as an appropriate level to move neutral relative to the benchmark.

The bullet curve strategy was meant to capitalize on a steepening curve. Unfortunately, this positioning provided little benefit beyond the initial rise to a 2s/10s curve spread around 55bps. Since reaching this level, the steepening has stalled. The committee felt it was appropriate to exit this strategy in coordination with moving the duration toward neutral.

Positioning in IG corporates (70% relative) and securitized (neutral) is unchanged.

The sizing of conviction positions has been adjusted to reflect current market dynamics better. Standard hedging vehicles, such as gold and Treasuries, have not been sufficient. Investors have been piling into the dollar for wartime protection. Since ELD holds emerging market debt, it has suffered, but in the event of an end to the conflict, we view EM as still a strong play and expect a rebound.

The characteristics, rationale, and deviations below reflect the index positioning relative to the baseline benchmark effective April 1, 2026.

Tilt Rationale 

Neutral Duration	The committee continues to view the economy as strong and inflation as sticky, but the recent surge in rates led to the committee’s decision to move to neutral duration.
Bulleted Curve	For several months, the Index held a bulleted curve strategy, betting on a steeper yield curve. The curve steepening trade has stalled, and the committee has decided to move to a neutral curve position to the benchmark.
70% Underweight IG Credit	The Index has held an underweight position relative to the benchmark in investment-grade corporate bonds, believing tight credit spreads and high valuations offer little value. Given our belief in a strong economy and sticky inflation, we believe we should increase our corporate exposure, but through high-yield exposure.
Neutral Securitized	The Index holds a neutral position relative to the benchmark within the securitized sector.
5% Short-Term TIPS	A short-term TIPS position offers inflation protection at an attractive yield. It is a hedge against another large surge in crude prices.
2% Interest Rate Hedged High-Yield	With credit spreads still tight, picking up yield from lower-quality corporates is an attractive play. If an end to the conflict materializes, high-yield bonds would benefit from the recovery.
3% Emerging Market Local Debt	With credit spreads extremely tight, picking up yield from lower-quality corporates is an attractive play. If an end to the conflict materializes, high-yield bonds would benefit from the recovery. Given the dollar safe-haven demand right now, this position would benefit from de-escalation.

Allocation

Name	Market Value (%)
iShares MBS ETF	25.90
iShares 3-7 Year Treasury Bond ETF	15.30
Schwab Short-Term US Treasury ETF	13.00
Schwab Long-Term U.S. Treasury ETF	9.05
Vanguard Short-Term Corporate Bond ETF	5.87
iShares 7-10 Year Treasury Bond ETF	5.50
Vanguard Long-Term Corporate Bond ETF	5.46
iShares 0-5 Year TIPS Bond ETF	5.00
Vanguard Intermediate-Term Corporate Bond ETF	4.85
WisdomTree Emerging Markets Local Debt Fund	3.00
iShares Agency Bond ETF	2.25
WisdomTree Interest Rate Hedged High Yield Bond Fund	2.00
iShares BBB Rated Corporate Bond ETF	2.00
iShares 20+ Year Treasury Bond ETF	0.82

Historical Allocations