Cavanal Hill Bond Fund Quarterly Commentary
Market Overview
Fixed income securities are subject to interest rate risks. The principal value of a bond falls when interest rates rise and rises when interest rates fall. During periods of rising interest rates, the value of a bond investment is at greater risk than during periods of stable or falling rates. Bond funds will tend to experience smaller fluctuations in value than stock funds. However, investors in any bond fund should anticipate fluctuations in prices, especially for longer-term issues and in environments of changing interest rates.
Investment in artificial intelligence (AI)-related infrastructure and durable goods remained strong, but consumer sentiment weakened, reflecting concerns over inflation and labor market softness.
In September, the Federal Reserve cut its benchmark interest rate by 25 basis points (0.25%) to a range of 4.00–4.25%, its first rate cut since December 2024. The move was driven by rising concerns about a softening labor market and broader concerns about the U.S. economy weakening, despite inflation remaining above the Fed’s 2% target. Fed Chair Jerome Powell emphasized that while layoffs remain low, job-finding rates have declined, particularly for new entrants. The Fed also acknowledged that the inflationary impact of tariffs might be smaller and take longer to materialize than previously anticipated, suggesting a cautious approach to future rate adjustments.
How are you positioning the Fund?
We believe that agency mortgage-backed securities continue to have an attractive risk/return profile. The Fund has a longer duration than the benchmark ina falling rate environment. Credit spreads remain tight, although we would see wider spreads as an opportunity to add to credit risk within the portfolio.
Why should investors consider investing in this fund?
With economic uncertainty rising along with financial market volatility, high quality fixed income should be a particularly attractive asset class now and for the foreseeable future in our view.
An investor should consider a fund’s investment objectives, risks and charges and expenses carefully before investing or sending money. This and other important information about an investment company can be found in the fund’s prospectus. To obtain a Cavanal Hill Funds prospectus or summary prospectus, please call 800-762-7085or visit us at www.cavanalhillfunds.com. Please read it carefully before investing.
Cavanal Hill Investment Management, Inc. is an SEC-registered investment adviser and a wholly-owned subsidiary of BOK Financial Corporation, a financial holding company (“BOKF”). BOKF, NA serves as the custodian for the Cavanal Hill Funds. Cavanal Hill Investment Management, Inc. provides investment advice, administration and other services for the Funds and receives a fee for providing such services as fully described in the prospectus. The Funds are distributed by Cavanal Hill Distributors, Inc., a registered Broker/Dealer, member FINRA and wholly-owned subsidiary of BOKF.
Commentary provided is for the indicated period and is designed to provide a frame of reference. It does not constitute investment advice. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. The opinions expressed herein reflect the judgment of the authors at this date and are subject to change without notice and are not a complete analysis of any sector, industry or security. This document contains forward-looking statements that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the Cavanal Hill Funds, the securities and credit markets and the economy in general. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “plans,” “projects,” variations of such words and similar expressions are intended to identify such forward-looking statements. Management judgments relating to and discussion of the value and potential future value or performance of any security, group of securities, type of security or market segment involve judgments as to expected events are inherently forward-looking statements. Management judgments relating to and discussion of the value and potential future value or performance of any security, group of securities, type of security or market segment involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what is expressed, implied, or forecasted in such forward-looking statements. The potential realization of these forward-looking statements is subject to a number of limitations and risks, which are described in the Funds’ prospectuses, and investors or potential investors, are cautioned to review the Funds’ prospectuses and the description of such risks. Neither the Funds nor the Funds’ investment adviser, Cavanal Hill, undertake any obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events or otherwise.
Investment RisksFixed income securities are subject to interest rate risks. The principal value of a bond falls when interest rates rise and rises when interest rates fall. During periods of rising interest rates, the value of a bond investment is at greater risk than during periods of stable or falling rates. Bond funds will tend to experience smaller fluctuations in value than stock funds. However, investors in any bond fund should anticipate fluctuations in prices, especially for longer-term issues and in environments of changing interest rates.
If you’d like additional information about this or any of the Cavanal Hill Funds, please contact Bill King at 855.359.1898, Bill.King@cavanalhill.com, or cavanalhillfunds.com.Not FDIC Insured | May Lose Value | No Bank Guarantee