Voya GNMA Income Fund Quarterly Commentary - 3Q25
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Voya GNMA Income Fund Quarterly Commentary - 3Q25

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 cut rates by 25 basis points (bp) during the quarter and according to the Fed’s dot plot in September, two more cuts are expected by the end of 2025. In the third quarter, the Fed reduced its balance sheet through runoff, with 3Q25 runoff equating to roughly $51 billion in additional mortgage-backed securities (MBS) supply.
  • The yield curve bull steepened with 10-year rate down 8 bp on the quarter. The 30-year fixed mortgage rate decreased roughly 33 bp to 6.43%.
  • GNMA MBS outperformed Treasuries by 57 bp in sympathy with the overall risk-on sentiment. Belly coupons such as 3.5s were the worst performers among the coupon stack.
  • Following the typical summer decline, housing market activity perked with additional support from declining mortgage rates. Both New Home Sales and Existing Home Sales increased, although overall home sales were still subdued by historical standards.
  • The Voya GNMA Income Fund modestly underperformed its benchmark, the Bloomberg GNMA Index (the Index) on a net asset value (NAV) basis.

Portfolio review

The Voya GNMA Income Fund modestly underperformed, the Index on a NAV basis. During the quarter, underperformance was mostly attributable to collateralized mortgage obligation (CMO), which lagged index MBS. This was partially offset by a modest duration overweight.

Current outlook and strategy

Agency MBS outperformed in the third quarter in correlation with the overall risk-on sentiment. 10-year Treasury rate ended the quarter 8 bp lower at 4.15% and 2-year/10-year bull steepened. Housing activity perked up thanks to decreasing mortgage rates and the end of summer seasonality. Inflation, as measured by Consumer Price Index (CPI), remained contained as it was mostly in line with median market estimates in both July and August. 

From a technical perspective, lower coupons remain sensitive to supply and demand factors. As the largest part of the index with no new supply, lower coupons tend to outperform when there is passive index flows into Fixed Income and or MBS funds. Money managers continue to be the primary buyer of mortgages heading into year end, while demand for Ginnies versus Conventionals are dominated by technical factors. If the reproposed banking regulations require smaller banks to follow similar regulatory requirements akin to their larger, global systemically important bank (GSIB) counterparts, we could see a resurgent bank demand for Ginnie Mae MBS in the fourth quarter. 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. 

Housing prices were stable during the quarter with Case-Shiller 20-City Home Price Index down a seasonally adjusted 0.07% in July. Overall MBS supply appears to be relatively docile for the foreseeable future for both gross and net issuance; however, we will continue to monitor the technical factors impacting MBS supply. 

Voya GNMA Income Fund maintains an off-benchmark allocation to conventional MBS, where technical demand and fundamental value appear more attractive. The Fund remains overweight off-benchmark CMO 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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