TSI: Unattractive Entry Point (Rating Downgrade)
Summary
- TCW Strategic Income Fund has delivered over 20% in total return since our 'Buy' rating last year, driven by lower rates and tighter spreads.
- The fund remains overweight MBS securities and investment-grade corporates, with no leverage, and has seen its discount to NAV narrow significantly.
- Given the current valuation and narrow discount to NAV, TSI no longer presents an attractive entry point and is downgraded to 'Hold'.
- Future rate cuts by the Fed might disappoint, potentially leading to rates retracement, which could negatively impact TSI's performance.
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