Voya GNMA Income Fund Quarterly Commentary - 4Q25
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Voya GNMA Income Fund Quarterly Commentary - 4Q25

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 50 basis points (bp) during the quarter and according to the Fed’s dot plot in December, one more cut is expected by the end of 2026. In the 4th quarter, the Fed reduced its balance sheet through runoff, with 4Q25 runoff equating to $46 billion in additional mortgage-backed securities (MBS) supply.
  • The interest rate curve steepened with 2-year rate down 13 bp and 30-year rate up 11 bp on the quarter. The 30-year fixed mortgage rate decreased roughly 12 bp to 6.18%.
  • GNMA MBS outperformed Treasury hedges by 57 bps in sympathy with the overall risk-on sentiment and support from government-sponsored enterprises (GSE) buying. Belly coupons such as 3s were the best performers within the coupon stack according to Bloomberg.
  • Housing market activity remained steady into slower winter seasonals. Existing home sales increased marginally, and overall home sales were still subdued by historical standards.
  • Voya GNMA Income Fund underperformed its benchmark, the Bloomberg GNMA Index (the Index) on a net asset value (NAV) basis.

Portfolio review

Voya GNMA Income Fund underperformed the Index on a NAV basis. During the quarter, underperformance was mostly attributable to collateralized mortgage obligations (CMOs). Modest duration overweight helped performance slightly during the period.

Current outlook and strategy

Agency MBS continued to outperform in the fourth quarter in correlation with the overall risk-on sentiment and renewed buying from Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC). 10-year Treasury rate ended the quarter little changed at 4.17% and 2-year/10-year steepened. Housing activities remained steady into slower winter seasonals, thanks to decreasing mortgage rates. Inflation, as measured by Consumer Price Index (CPI), remained contained as it was mostly in line with median market estimates in December. 

From a technical perspective, mortgage performance this quarter was primarily driven by the ramped up GSE purchase program as they went from a $5 billion per month purchase in July through September to a $15 billion/month pace in October and November. Money managers are expected to pick up the balance of the supply going forward with domestic banks and oversea accounts offering inconsistent demand. Demand for Ginnies versus Conventionals is dominated by technical factors. If the reproposed banking regulations require smaller banks to follow similar regulatory requirements akin to their larger, Global Systemically Important Banks (GSIB) counterparts, we could see a resurgent bank demand for Ginnie Mae MBS in the new year. 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 perked up during the quarter with Case-Shiller 20-City Home Price Index up a seasonally adjusted 1.31% in October. Overall MBS supply appears to be relatively docile in the foreseeable future for both gross and net issuance, with most of net issuance coming from GNMA; however, the GNMA fund managers will continue to monitor the technical factors impacting MBS supply. 

Voya GNMA Income Fund continues to be underweight GNMA collateral relative to the benchmark where performance is determined by technical demand factors. 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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