Cavanal Hill Bond Fund Quarterly Commentary
Market Overview
The first quarter of 2026 underscored a maturing U.S. economic cycle, marked by moderating growth, elevated inflation pressures, and a Federal Reserve firmly in wait‑and‑see mode. Although we entered the year poised for significant economic growth, uncertainty related to the surprise U.S. attack on Iran drove inflation fears and expectations for slower growth, a volatile combination for the bond market.
U.S. first‑quarter economic data showed gradual cooling, with signs of a softening U.S. labor market.Consumer confidence remained subdued, reflecting persistent concerns around inflation, tariffs, and higher energy costs.
After cutting rates three times in the second half of 2025, the Fed held monetary policy steady, maintaining the federal funds target range at 3.50%–3.75%. Policymakers acknowledged evidence of labor market cooling but emphasized that inflation remains above target, particularly amid tariff pressures and higher energy prices arising from the Iran conflict. Yields rose significantly across the curve, with short rates rising more than long rates, flattening the yield curve.
How are you positioning the Fund?
We believe that yield spreads remain attractive in residential mortgage‑backed securities. The Fund continues to have a significant allocation to asset‑backed securities as their yields continue to show value. The Fund’s duration remains neutral.
Why should investors consider investing in this fund?
With economic uncertainty rising along with financial market volatility, high quality fixed income remains an attractive asset class now and for the foreseeable future in our view.
Disclosures
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 inthe 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 Risks
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.
If you’d like additional information about this or any of the Cavanal Hill Funds, please contact Jim Nichols at 855.359.1898, James.Nichols@cavanalhill.com, or cavanalhillfunds.com. Not FDIC Insured | May Lose Value | No Bank Guarantee