Credit Suisse's CIK Fund Not Expected to Surge on Rate Cuts

Credit Suisse Asset Management Income Fund (CIK) is a closed-end fund that seeks to provide high current income by investing primarily in a diversified portfolio of high-quality, fixed income securities. Despite market expectations of rate cuts, CIK's portfolio is well-positioned to generate income, with a focus on high-quality, short-term debt securities and a duration that is below the benchmark. The fund's income-generating strategy is designed to provide a stable source of returns in a low-rate environment.

The Credit Suisse Asset Management Income Fund, Inc. (NYSE: CIK) is a closed-end fund that aims to provide high current income to its investors by investing primarily in a diversified portfolio of high-quality, fixed income securities. Despite market expectations of rate cuts, CIK's portfolio is well-positioned to generate income, with a focus on high-quality, short-term debt securities and a duration that is below the benchmark. The fund's income-generating strategy is designed to provide a stable source of returns in a low-rate environment.

CIK has managed to deliver a 149.43% total return over the past ten years, significantly outperforming the Bloomberg High Yield Very Liquid Index (JNK) which delivered a 61.38% total return over the same period CIK: Don't Expect Rate Cuts To Cause Bonds To Surge^[1]. However, it is important to note that reinvesting the distributions paid out by CIK and JNK was necessary to achieve these returns. The fund's 9.06% current yield is significantly higher than the 6.52% current yield of the JNK, indicating its strong focus on income generation.

The Federal Reserve's recent rate cut has not led to the expected surge in bond prices. Instead, U.S. Treasury bond yields have risen, and mortgage rates are likely to follow suit. This is due to the persistent high inflation rates in the U.S. economy, which currently stand at a 4.8% annualized rate CIK: Don't Expect Rate Cuts To Cause Bonds To Surge^[1]. For investors in the top tax bracket, the only bonds that can deliver a positive real return are those with yields above 7.62%, such as CCC-rated or lower junk bonds. High-yield funds like CIK may still offer opportunities for positive real returns through active management and trading, as evidenced by the fund's high turnover rate of 24% in the first six months of 2025 CIK: Don't Expect Rate Cuts To Cause Bonds To Surge^[1].

Among its peers, CIK has a yield of 9.06%, which is slightly below the median yield of 9.07%. While this may reduce its appeal among some income-seeking investors, it is important to consider the fund's focus on high-quality, short-term debt securities and its active management strategy. The fund's semi-annual report indicates a high turnover rate, suggesting that it is actively trading bonds prior to maturity CIK: Don't Expect Rate Cuts To Cause Bonds To Surge^[1].

Investors should not expect a significant surge in bond prices due to the recent interest rate cuts. The bond market is likely to remain under pressure as investors seek positive real returns. CIK's strategy of focusing on high-quality, short-term debt securities and active management may continue to generate stable income for its investors in this challenging environment.