During the month, the Fund selectively purchased newly issued bonds, adding exposure to the financials sector, particularly higher-quality banks. The Fund also added to high-yield bonds, especially in the energy sector, while reducing exposure to technology and taking profits on holdings that had performed well. In securitized credit, the Fund added lower-quality securities while selling higher-quality holdings that appeared relatively expensive. The Fund also reduced its sensitivity to changes in interest rates, with duration now roughly in line with, to slightly longer than, its benchmark.
We see a constructive outlook for corporate bonds heading into the fall. Despite continued headlines out of the Middle East and heightened volatility in underlying U.S. Treasury yields and oil prices, there has been limited impact on corporate bonds.
From a fundamental perspective, investment-grade corporate issuers remain on very stable footing in our view. Second-quarter earnings have come in stronger than expected, with U.S. Global Systemically Important Banks (GSIBs) reporting record results, and strong performance across a broad range of sectors. Within the technology sector, we are carefully monitoring the sharp increase in capital expenditures and its impact on leverage over time. However, we also recognize the sector's healthy free cash flow generation and the significant increases in forward guidance from hyperscale companies. That said, we remain mindful of the anticipated wave of artificial intelligence (AI)-related new corporate bonds expected to come to market. In the near-term, we believe that the healthy macroeconomic backdrop and the attractive overall yield on corporate bonds can enable the asset class to perform well through the rest of this year.
