Company: WIA
Filing Date: 2025-01-28
Form Type: N-CSR
Source: 0001133228-25-000566
Chunk: 3

Company: WESTERN ASSET INFLATION-LINKED INCOME FUND
Filing Date: 2025-01-28
Form: N-CSR
Chunk 3
---
 strategy, day-to-day portfolio management, oversight and coordination of the Fund are Michael C. Buchanan and Frederick Marki. Q. What were the overall market conditions during the Fund’s reporting period? A. The overall U.S. fixed income market experienced periods of volatility but generated a positive return over the twelve-months ended November 30, 2024. The market was driven by several factors, including resilient economic growth, moderating inflation, shifting U.S. Federal Reserve (Fed) monetary policy, and several geopolitical issues. Short-term U.S. Treasury yields declined as the Fed lowered interest rates in September
2024 (the first reduction since 2020) and again in November 2024. The two-year Treasury yield began the reporting period at 4.73% and ended the period at 4.13%. Its high for the period was 5.04% on April 30, 2024, and its low of 3.49% occurred on September 24, 2024.
Long-term U.S. Treasury yields also declined in part due to easing inflation and loosening Fed monetary policy. The ten-year Treasury yield began the reporting period at 4.37% and ended at 4.18%. Its high for the period was 4.70% on April 25, 2024, and its low of 3.63% occurred on September 16, 2024. Inflation moderated, although it remained higher than the Fed’s preferred 2% target during the reporting period. For the twelve months ended November 30, 2024, the seasonally unadjusted rate of inflation, as measured by the Consumer Price Index for All Urban Consumers (CPI-U) iii , was 2.7%. The CPI-U less food and energy was 3.3% over the same time frame. TIPS, as measured by the Bloomberg U.S. TIPS Index iv , returned 6.26% during the reporting period. Q. How did we respond to these changing market conditions? A. A number of adjustments were made to the Fund’s portfolio during the reporting period. The Fund trimmed but maintained its overweight duration stance versus the benchmark, mostly at the very long end of the yield curve which, in turn, reduced the Fund’s yield curve flattener positioning. During the reporting period, TIPS exposure was trimmed to a smaller overweight position versus the benchmark. The Fund also reduced its overweight exposure to investment-grade corporate credit. The Fund generally maintained its modest overweight exposures