Voya GNMA Income Fund Quarterly Commentary - 1Q26
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Voya GNMA Income Fund Quarterly Commentary - 1Q26

Primarily invests in Government National Mortgage Association (GNMA) securities with maturities in excess of one year and which have the same credit quality as U.S. Treasury securities, but higher yields to compensate for prepayment uncertainty.

Key takeaways

  • The U.S. Federal Reserve kept rates on hold during the quarter and according to the Fed’s dot plot in March, one more cut is expected by the end of 2026. In the 1 st quarter, the Fed reduced its mortgage-backed securities (MBS) holdings through runoff, with 1Q26 runoff equating to $42.5bn in additional MBS supply. 
  • The interest rate curve bear flattened with 2-year rate up 32 basis points (bp) and 30- year rate up only 7 bp on the quarter. The 30-year fixed mortgage rate increased roughly 17 bp to 6.35%. 
  • GNMA mortgage-backed securities (MBS) outperformed Treasury hedges by 24 bp after government-sponsored enterprises (GSE) purchase announcement and some demand from banks and overseas accounts. Lower coupons outperformed higher coupons due to elevated demand. 
  • Housing market activity remained muted into slower seasonals and elevated mortgage rates. Existing home sales increased marginally, but overall home sales were still subdued by historical standards. 
  • Voya GNMA Income Fund performed inline with its benchmark on a net asset value (NAV) basis.

Portfolio review

Voya GNMA Income Fund performed inline with its benchmark on a NAV basis. During the quarter, neither security selection nor sector allocation results had a meaningful impact on relative performance.

Current outlook and strategy

Agency MBS continued to outperform in the first quarter in correlation with the overall risk-on sentiment and continued strong technical tailwinds. The 10-year Treasury rate ended the quarter 15 bp higher at 4.32% and 2-year/10-year bear flattened. Housing market activity remained muted into slower seasonals and elevated mortgage rates. Inflation, as measured by consumer price index (CPI), remained contained as it was mostly in line with median market estimates in January and February. 

From a technical perspective, mortgage performance this quarter was primarily driven by strong technical demand stemming from the announcement of a $200 billion GSE purchase program. However, domestic banks and oversea accounts continued to offer inconsistent demand, while demand for Ginnies versus Conventionals is dominated by technical factors. 

Overall MBS supply appears to be relatively docile for the foreseeable future for both gross and net issuance, with most of net issuance coming from GNMA. Total net issuance during the quarter was only $15 billion, with negative net issuance in both February and March. Housing prices increased slightly during the quarter with Case-Shiller 20-City Home Price Index up a seasonally adjusted 0.16% in January. Additionally, Basel three Endgame proposal has been published during the quarter. The new framework does not change the risk weighting for conventional MBS. However, it does tweak risk weightings for whole loans based on loan to value (LTV). On the margin, banks might be more incentivized to inventory whole loans on their balance sheet, thus decreasing securitization rate and net supply. 

From a fundamental perspective, prepayment speeds for recently produced, high coupon, veterans affairs (VA) loans remain elevated due to the efficiency of VA’s streamlined refinancing program. Looking ahead, there have been several bills proposed recently that would hike the refinance fees on VA mortgages, however, it is unclear whether they would garner enough support to pass. 

Voya GNMA Income Fund maintains an allocation to conventional MBS, where technical factors appear more favorable. The Fund remains overweight off-benchmark GNMA and agency-backed CMOs which offer greater longer-term value with higher spreads relative to generic collateral, especially on an option-adjusted basis. Additionally, the Fund maintains a preference for higher coupon collateral such as 5s to 6s.

Related Resources

Voya GNMA Income Fund Fact Sheet

Related Products

Voya GNMA Income Fund

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The Bloomberg U.S. GNMA Index is an unmanaged index covering mortgage-backed pass-through securities of the Ginnie Mae (GNMA). Index returns do not reflect fees, brokerage commissions, taxes or other expenses of investing. Investors cannot invest directly in an index. Source: Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Bloomberg does not approve or endorse this material, nor guarantee the accuracy or completeness of any information herein, nor make any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, shall not have any liability or responsibility for injury or damages arising in connection therewith.

All investing involves risks of fluctuating prices and the uncertainties of rates of return and yield inherent in investing. You could lose money on your investment and any of the following risks, among others, could affect investment performance. The following principal risks are presented in alphabetical order which does not imply order of importance or likelihood: Credit; Derivative Instruments; Environmental, Social, and Governance (Fixed Income); Interest Rate; Liquidity; Market Disruption and Geopolitical; Mortgage- and/or Asset-Backed Securities; Other Investment Companies; Prepayment and Extension; Portfolio Turnover; Repurchase Agreements; Securities Lending; U.S. Government Securities and Obligations; When-Issued, Delayed Delivery and Forward Commitment Transactions. While the Fund invests in securities guaranteed by the U.S. Government as to timely payments of interest and principal, the Fund shares are Not Insured or Guaranteed. Investors should consult the Fund’s Prospectus and Statement of Additional Information for a more detailed discussion of the Fund’s risks.

The Fund discussed may be available to you as part of your employer sponsored retirement plan. There may be additional plan level fees resulting in personal performance to vary from stated performance. Please call your benefits office for more information.

This commentary has been prepared by Voya Investment Management for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest rate levels, (4) increasing levels of loan defaults (5) changes in laws and regulations and (6) changes in the policies of governments and/or regulatory authorities.

The opinions, views and information expressed in this commentary regarding holdings are subject to change without notice. The information provided regarding holdings is not a recommendation to buy or sell any security. Portfolio holdings are fluid and are subject to daily change based on market conditions and other factors. Past Performance does not guarantee future results

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