Easy Income Portfolio: December 2025 Edition

Income investors live in a world that rarely matches the headlines. The news cycle obsesses over every tick in rates and every rumor out of the Federal Reserve. Our job is much simpler. We collect income. We protect capital. We position the portfolio so that market fear creates opportunity rather than damage. This month gave us a textbook example of why that discipline matters. Credit spreads tightened to levels we have not seen in years. Rates drifted lower. Markets behaved as if risk had been permanently retired. Under the surface the imbalances grew, the opportunities widened, and our portfolio delivered the kind of quiet, reliable performance that makes Easy Income such a powerful strategy.

The most important signal this month came from the bond market. Investment grade corporate spreads moved to roughly seventy eight basis points over Treasuries, close to the tightest levels of the past decade. High yield spreads declined to just under three hundred basis points, far below the long term average. BB spreads fell to the one percent area. These are not normal readings. These are levels that price in the best possible future and leave investors with almost no cushion if anything goes wrong. Markets are declaring that credit risk does not matter. We know better. When spreads are this tight capital preservation becomes paramount. Expected returns shrink. Downside sensitivity rises. This is exactly why we stay disciplined and avoid chasing beta.

These tight spreads affect every major segment of the income landscape. In oil and gas the headline spreads look fine, but the underlying risks are diverging. Midstream operators continue to benefit from record Permian production and stable volumes. Upstream producers, especially smaller and higher cost operators, face more pressure as crude prices soften and inventories build. Tight spreads disguise this divergence. The right income plays in energy remain midstream infrastructure and stable royalty interests, not levered producers hoping for higher prices.

Private credit continues to expand even as the cracks show. Defaults remain elevated. Bank regulators withdrew the old leveraged lending guidance, which opens the door for banks to reclaim higher quality lending from private credit funds. This will pressure returns for weaker players and compress spreads further in an already competitive market. The illusion of safety created by tight public credit spreads has encouraged some lenders to stretch for yield. We avoid that temptation and focus on established business development companies with transparent, senior secured portfolios.

Community banks operate in a different reality than the broad credit indexes. Subordinated debt in this sector does not trade like general corporate credit. Investors remain sensitive to funding stress, regulatory uncertainty, and the wave of upcoming refinancings in 2025 and 2026. Strong banks will call or refinance their debt easily. Weaker banks will struggle. This creates the kind of selective opportunity that Easy Income thrives on: careful underwriting, not broad exposure.

Mortgage backed securities moved in our favor this month. Agency RMBS benefited from calming volatility and improving rate sentiment, giving book values across mortgage REITs a much needed dose of stability. That strength did not extend fully to the commercial mortgage market. Office delinquencies remain high. Multifamily delinquencies are rising. Watch lists continue to grow. Prices have held up, but the fundamentals are stressed. This remains a structure driven market where only the right tranches deserve our capital.

Closed end funds stood out again as a compelling opportunity. Discounts remain wide across many categories. Activists continue to pressure boards, especially in the United Kingdom, where deep structural discounts are increasingly unacceptable to shareholders. We collect income while we wait for discounts to normalize and activists to do their work. This part of the portfolio remains one of the most asymmetric opportunities in the entire income universe.

Credit risk transfer securities continue to expand in the United States and Europe. Deal structures are improving. Regulatory frameworks have evolved to encourage responsible issuance and provide clarity around capital relief. Spreads remain attractive compared to similarly rated corporate securities. When chosen carefully, these securities provide diversification and compelling yield without taking unnecessary fundamental risk.

Asia Pacific sovereign bonds have emerged as a quiet but important diversifier. Yields in Japan, Australia, and Korea remain elevated relative to history even after drifting down with global expectations. These markets offer strong income, solid credit quality, and potential capital gains if global conditions soften in 2026. Preferred stocks in the United States remain one of the most attractive income niches. Many high quality issues still trade below par despite improving fundamentals. Investors who understand the structure and pick their spots can earn high yields with meaningful upside.

All of these forces shaped the Easy Income portfolio this month. The headlines were colorful. The portfolio was calm. The checks arrived. Two holdings delivered major positive events, while the rest continued their steady compounding. Below is the security-by-security review.

Security-by-Security Portfolio Update

Virtus InfraCap U.S. Preferred Stock ETF (NYSE:PFFA)

PFFA continued to do exactly what we want from a preferred stock fund. Distributions were steady and the portfolio benefited from a calmer rate environment that helped bank and utility preferreds firm up. No surprises, just reliable income.

Special Opportunities (NYSE:SPE)

SPE delivered another routine month with its regular dividend and stable price action. The fund continues to operate near the upper end of its trading range, supported by disciplined discount management and ongoing activist activity.

Simplify MBS ETF (NYSE:MTBA)

MTBA remained quiet and stable as agency mortgage backed securities continued to recover. NAV and price stayed aligned and there were no structural or strategic changes during the month.

iShares Mortgage Real Estate ETF (BATS:REM)

REM enjoyed a modest uptick as mortgage rate volatility eased. Spreads in mortgage REITs finally found some footing, giving the fund a welcome lift after a challenging stretch earlier in the year.

Saba Closed-End Funds ETF (BATS:CEFS)

CEFS maintained disciplined positioning by nudging cash higher and continuing to harvest closed end fund discounts. No major corporate events took place, allowing the strategy to compound quietly under the surface.

State Street Blackstone Senior Loan ETF (NYSE:SRLN)

SRLN delivered another steady distribution and moved through the month without incident. The senior loan market continues to benefit from low defaults and strong floating rate income.

Tortoise Energy Infrastructure Corp. (NYSE:TYG)

TYG delivered the biggest headline of the month by completing its merger with TEAF. Management then raised the monthly distribution, a clear signal of improved scale and stronger cash flow across the combined platform.

Angel Oak Financial (NYSE:FINS)

FINS reported its regular dividend and announced a management fee waiver through next November. This immediately improves net yield and underscores strong execution in its bank and structured credit holdings.

Aberdeen Asia-Pacific (AMEX:FAX)

FAX reported no significant developments. The fund continued to deliver stable income from Asia Pacific sovereign and corporate bonds.

Dorchester Minerals (NASDAQ:DMLP)

DMLP had no major news, but production volumes remained healthy and royalty cash flows continued to support strong distributions.

ArrowMark Financial (NASDAQ:BANX)

BANX delivered one of the portfolio's best developments with the declaration of a forty cent special dividend payable in early December. The payout reflects exceptional performance in its bank subordinated debt and credit risk transfer portfolio. Shares softened slightly on light volume, but the underlying fundamentals remain strong.

Nuveen Real Asset Income & Growth Fund (NYSE:JRI)

JRI continued its consistent performance and declared its regular monthly distribution. Slightly easing rate pressures helped sentiment across real asset securities.

VanEck BDC Income ETF (NYSE:BIZD)

BIZD produced strong income with its double digit yield. Price action was slightly softer as the BDC sector consolidated after a strong run, but there were no issuer specific concerns within the portfolio.

WisdomTree Private Credit and Alternative Income Fund (BATS:HYIN)

HYIN navigated a softer tone in private credit as regulators increased scrutiny. The fund continued to earn its high yield and did not experience any portfolio level disruptions.

Infrastructure Capital Bond Income ETF (NYSE:BNDS)

BNDS delivered another quiet and reliable month. Its mix of investment grade and high yield corporate exposure performed steadily with no changes to strategy or holdings.

Final Thoughts

This was a month where the surface looked calm while the underlying cracks widened. Credit markets are priced for perfection. Our job is to collect income while avoiding the risks that other investors ignore when spreads get tight. The Easy Income portfolio is built to do exactly that. We lean into misunderstood niches, structural inefficiencies, and securities that pay us generously to wait. We avoid the temptation to chase yield in markets that no longer offer adequate compensation. The coming months will bring more opportunities as the disconnect between fundamentals and pricing grows. We will continue to stay disciplined, patient, and focused on income that compounds quietly and consistently over time.