This article provides an in-depth analysis of the Voya GNMA Income Fund's performance during the fourth quarter of 2025, detailing market conditions, contributing factors to fund performance, and strategic positioning for future returns.
Navigating Volatility: A Deep Dive into Voya GNMA Income Fund's Q4 2025 Journey
Federal Reserve's Monetary Policy Adjustments and Market Reactions
During the final quarter of 2025, the United States Federal Reserve implemented a significant reduction of 50 basis points in its interest rate, with further cuts anticipated by the close of 2026, as indicated by the Fed's December forecasts. This monetary shift had a notable impact on the interest rate curve, leading to a steepening effect where the 2-year rate decreased by 13 basis points while the 30-year rate climbed by 11 basis points within the quarter.
Voya GNMA Income Fund's Performance Against Market Benchmarks
In the context of these market dynamics, the Voya GNMA Income Fund experienced a period of underperformance relative to its designated benchmark, the Bloomberg GNMA Index, when evaluated on a net asset value (NAV) basis. This outcome highlights the challenges faced by the fund amidst the evolving economic landscape and interest rate environment.
Key Drivers of Mortgage Market Performance in Q4 2025
The mortgage market's performance throughout this quarter was largely influenced by the intensified efforts of the Government Sponsored Enterprises (GSEs). These entities significantly ramped up their purchase programs, reaching a pace of $15 billion per month in both October and November. Such increased activity provided substantial support and impetus to the mortgage sector.
Strategic Allocation: Fund's Position in Off-Benchmark GNMA and Agency CMOs
Looking ahead, the Voya GNMA Income Fund maintains a strategic allocation with an overweight position in off-benchmark GNMA securities and agency-backed Collateralized Mortgage Obligations (CMOs). This positioning is rooted in the belief that these instruments offer superior long-term value and provide higher spreads when compared to more conventional collateralized assets, thus aiming to capitalize on future market opportunities.
