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By  Kenneth A. Orchard, CFA® , Vincent Chung, CFA®
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Three reasons to consider T. Rowe Price Diversified Income Bond Strategy

Seeks to provide high yield‑like returns with investment‑grade levels of risk.

April 2025, From the Field

Key Insights
  • The uncertain market environment highlights the importance of an approach that is flexible and can invest broadly across a variety of different fixed income sectors.
  • Diversified Income Bond is a “go‑anywhere” strategy that aims to provide high yield‑like returns with investment‑grade levels of risk.
  • Our approach seeks to diversify return sources and risks, integrating top‑down macro views with bottom‑up fixed income security research.

Today’s uncertain market environment speaks to the importance of maintaining a globally diversified fixed income allocation. The ability to invest across a broad range of sectors and tactically adjust allocations can help to generate a more stable return and lower volatility through diversification. We believe that our Diversified Income Bond Strategy, which is a flexible, “go‑anywhere” core bond strategy, is suited precisely to this environment. Specifically, it offers the following three potential benefits:

1. Attractive income potential

We aim to provide investors high yield‑like returns with investment‑grade levels of risk. To do so, we leverage the full breadth and depth of T. Rowe Price Associates, Inc.’s (TRPA’s), fixed income capabilities and integrate the best income ideas from our global research platform into a single high‑quality portfolio.

"We aim to provide investors high yield‑like returns with investment‑grade levels of risk."
Kenneth Orchard, CFA, Portfolio Manager, Head of International Fixed Income

We have the flexibility to invest across the broad fixed income universe, spanning more than 15 major fixed income sectors, 80 countries, and 40 currencies, to help us identify the most attractive opportunities. We believe that opening up the global bond opportunity set in this way allows us to seek higher yields and better risk‑adjusted returns. More importantly, diversifying return and income sources from various higher‑yielding sectors also allows the strategy to take on different types of risks that may be unrelated or even negatively correlated. This helps to lower overall portfolio volatility, better positioning it to pursue consistent long‑term returns.

Diversified Income Bond Strategy snapshot

(Fig. 1) Seeks to build an optimal global fixed income portfolio
Diversified Income Bond Strategy snapshot

As of December 31, 2024.
1 The majority of the currency exposure will be hedged back to the U.S. dollar.
Source: T. Rowe Price.

2. Truly global portfolio

One of the strategy’s major distinguishing features is its truly global nature. This is distinct from other fixed income solutions that may have heavier tilts toward specific sectors, such as U.S. core bonds or securitized credit. In contrast, we prefer not to focus on geographies or sectors to avoid concentrations in a single sector or interest rate cycle. Instead, we utilize the full global opportunity set, including government, corporate, and securitized debt, both investment‑grade and high yield issues, across developed and emerging markets. We are also able to invest in nonmainstream sectors, such as mortgage‑backed securities and convertible bonds.

We view access to such a broad fixed income investment universe as crucial because it gives the strategy more sectors, issuers, and interest rate exposures to choose from, enabling us to pursue geographically and sectorally diversified sources of total return and income. This, in turn, also means we are harvesting a variety of risk premiums.

3. Controlled risk profile

The overall level of credit risk we seek is to maintain an average portfolio credit rating of investment grade. Furthermore, our active management style and robust risk controls help us to minimize volatility through different market cycles. We can adjust risk positions, hedges, and liquidity and are able to take more defensive or opportunistic positions as market conditions evolve. It is this flexibility that helps the strategy achieve its value proposition—aiming to give investors a smoother ride through market volatility while still pursuing consistent returns and income.

"…our active management style and robust risk controls help us to minimize volatility through different market cycles."
Vincent Chung, CFA, Portfolio Manager, Global Fixed Income

Against a backdrop of heightened political uncertainty, monetary policy dispersion, high fiscal deficits, and tariff concerns, bond markets are likely to experience increased dispersion and volatility this year. We believe this environment is conducive for our globally diversified bond strategy, which seeks higher income and returns through holistic portfolio construction and the tactical management of duration, credit sectors, currency, and security selection.

Kenneth A. Orchard, CFA® Portfolio Manager, Head of International Fixed Income Vincent Chung, CFA® Portfolio Manager, Global Fixed Income
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Risks—The following risks are materially relevant to the strategy:

ABS and MBS—Asset‑backed securities (ABS) and mortgage‑backed securities (MBS) may be subject to greater liquidity, credit, default and interest rate risk compared to other bonds. They are often exposed to extension and prepayment risk.

Contingent convertible bond—Contingent convertible bonds may be subject to additional risks linked to: capital structure inversion, trigger levels, coupon cancellations, call extensions, yield/valuation, conversions, write downs, industry concentration and liquidity, among others.

Credit—Credit risk arises when an issuer’s financial health deteriorates and/or it fails to fulfill its financial obligations to the portfolio.

Currency—Currency exchange rate movements could reduce investment gains or increase investment losses.

Default—Default risk may occur if the issuers of certain bonds become unable or unwilling to make payments on their bonds.

Derivative—Derivatives may be used to create leverage which could expose the portfolio to higher volatility and/or losses that are significantly greater than the cost of the derivative.

Emerging markets—Emerging markets are less established than developed markets and therefore involve higher risks.

Geographic concentration—Geographic concentration risk may result in performance being more strongly affected by any social, political, economic, environmental or market conditions affecting those countries or regions in which the portfolio’s assets are concentrated.

Hedging—Hedging measures involve costs and may work imperfectly, may not be feasible at times, or may fail completely.

High yield bond—High yield debt securities are generally subject to greater risk of issuer debt restructuring or default, higher liquidity risk and greater sensitivity to market conditions.

Interest rate—Interest rate risk is the potential for losses in fixed‑income investments as a result of unexpected changes in interest rates.

Liquidity—Liquidity risk may result in securities becoming hard to value or trade within a desired timeframe at a fair price.

Prepayment and extension—Mortgage‑ and asset‑backed securities could increase the portfolio’s sensitivity to unexpected changes in interest rates.

Real estate—Real estate and related investments can be hurt by any factor that makes an area or individual property less valuable.

Sector concentration—Sector concentration risk may result in performance being more strongly affected by any business, industry, economic, financial or market conditions affecting a particular sector in which the portfolio’s assets are concentrated.

Issuer concentration—Issuer concentration risk may result in performance being more strongly affected by any business, industry, economic, financial or market conditions affecting those issuers in which the portfolio’s assets are concentrated.

Total return swap—Total return swap contracts may expose the portfolio to additional risks, including market, counterparty and operational risks as well as risks linked to the use of collateral arrangements.

General risks

Conflicts of interest—The investment manager’s obligations to a portfolio may potentially conflict with its obligations to other investment portfolios it manages.

Counterparty—May materialize if an entity with which the portfolio does business becomes unwilling or unable to meet its obligations to the portfolio.

Custody—In the event that the depositary and/or custodian becomes insolvent or otherwise fails, there may be a risk of loss or delay in return of certain portfolio’s assets.

Cybersecurity—The portfolio may be subject to operational and information security risks resulting from breaches in cybersecurity of the digital information systems of the portfolio or its third‑party service providers.

ESG—Environmental, social, and governance (ESG) integration as well as events may result in a material negative impact on the value of an investment and performance of the portfolio.

Inflation—Inflation may erode the value of the portfolio and its investments in real terms.

Investment—Investing in portfolio involves certain risks an investor would not face if investing in markets directly.

Market liquidity—In extreme market conditions it may be difficult to sell the portfolio’s securities and it may not be possible to redeem shares at short notice.

Sustainability—Portfolios that seek to promote environmental and/or social characteristics may not or only partially succeed in doing so.

Operational—May cause losses as a result of incidents caused by people, systems, and/or processes.

Additional Disclosure

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

Important Information

This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is no guarantee or a reliable indicator of future results. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources’ accuracy or completeness. There is no guarantee that any forecasts made will come to pass.

The views contained herein are as of April 2025 and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request. It is not intended for distribution to retail investors in any jurisdiction.

Australia—Issued by T. Rowe Price Australia Limited (ABN: 13 620 668 895 and AFSL: 503741), Level 28, Governor Phillip Tower, 1 Farrer Place, Sydney NSW 2000, Australia. For Wholesale Clients only.

Colombia, Chile, Mexico, Perù, Uruguay—This material is prepared by T. Rowe Price International Ltd ‑ Warwick Court, 5 Paternoster Square, London, EC4M 7DX which is authorised and regulated by the UK Financial Conduct Authority ‑ and issued and distributed by locally authorized distributors only. For professional investors only.

DIFC—Issued in the Dubai International Financial Centre by T. Rowe Price International Ltd which is regulated by the Dubai Financial Services Authority as a Representative Office. For Professional Clients only.

EEA—Unless indicated otherwise this material is issued and approved by T. Rowe Price (Luxembourg) Management S.à r.l. 35 Boulevard du Prince Henri L‑1724 Luxembourg which is authorised and regulated by the Luxembourg Commission de Surveillance du Secteur Financier. For Professional Clients only.

Hong Kong—Issued by T. Rowe Price Hong Kong Limited, 6/F, Chater House, 8 Connaught Road Central, Hong Kong. T. Rowe Price Hong Kong Limited is licensed and regulated by the Securities & Futures Commission. For Professional Investors only.

New Zealand— Issued by T. Rowe Price Australia Limited (ABN: 13 620 668 895 and AFSL: 503741), Level 28, Governor Phillip Tower, 1 Farrer Place, Sydney NSW 2000, Australia. No Interests are offered to the public. Accordingly, the Interests may not, directly or indirectly, be offered, sold or delivered in New Zealand, nor may any offering document or advertisement in relation to any offer of the Interests be distributed in New Zealand, other than in circumstances where there is no contravention of the Financial Markets Conduct Act 2013.

Singapore—Issued by T. Rowe Price Singapore Private Ltd. (UEN: 201021137E), 501 Orchard Rd, #10‑02 Wheelock Place, Singapore 238880. T. Rowe Price Singapore Private Ltd. is licensed and regulated by the Monetary Authority of Singapore. For Institutional and Accredited Investors only.

South Africa—Issued in South Africa by T. Rowe Price International Ltd (TRPIL), Warwick Court, 5 Paternoster Square, London EC4M 7DX, is an authorised financial services provider under the Financial Advisory and Intermediary Services Act, 2002 (Financial Services Provider (FSP) Licence Number 31935), authorised to provide “intermediary services” to South African Investors. TRPIL’s Complaint Handling Procedures are available to clients upon request.  The Financial Advisory and Intermediary Services Act Ombud in South Africa deals with complaints from clients against FSPs in relation to the specific services rendered by FSPs. The contact details are noted below: Telephone: +27 12 762 5000, Web: www.faisombud.co.za, Email: info@faisombud.co.za

Switzerland—Issued in Switzerland by T. Rowe Price (Switzerland) GmbH, Talstrasse 65, 6th Floor, 8001 Zurich, Switzerland. For Qualified Investors only.

UK—This material is issued and approved by T. Rowe Price International Ltd, Warwick Court, 5 Paternoster Square, London EC4M 7DX which is authorised and regulated by the UK Financial Conduct Authority. For Professional Clients only.

© 2025 T. Rowe Price. All Rights Reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, the Bighorn Sheep design, and related indicators (troweprice.com/en/intellectual-property) are trademarks of T. Rowe Price Group, Inc. All other trademarks are the property of their respective owners.

202504‑4343476

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T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. T. Rowe Price has been independently verified for the 27-year period ended June 30, 2023, by KPMG LLP. The verification report is available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. Verification does not provide assurance on the accuracy of any specific performance report.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

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