In the third quarter of 2025, the Thrivent Money Market Fund actively navigated a dynamic interest rate environment, marked by a significant decision from the Federal Reserve. The fund strategically adjusted its holdings, first by extending maturities to capture favorable Treasury yields in anticipation of rate cuts, then by pivoting towards floating-rate assets to maximize returns from the Secured Overnight Financing Rate. These proactive measures were undertaken while steadfastly adhering to a conservative credit quality approach, predominantly investing in U.S. government and agency-related securities, aiming to optimize performance amid evolving market conditions.
The Federal Reserve's monetary policy significantly influenced the fund's strategy during this period. On September 17, the Fed implemented a 25-basis-point reduction in the Federal Funds Target rate, bringing it to a new range of 4.0-4.25%. This move, widely anticipated by market participants, prompted the Thrivent Money Market Fund to adapt its investment posture. Early in the quarter, the fund made a calculated decision to increase its weighted-average-maturity. This was primarily driven by the attractive yields offered by Treasury securities at the time, coupled with a strong expectation of an impending rate cut by the Federal Reserve. By locking in higher yields before the rate reduction, the fund aimed to secure better returns for its investors.
As the quarter progressed and the initial rate cut materialized, the fund observed a shift in market dynamics. The Secured Overnight Financing Rate (SOFR) remained elevated, presenting new opportunities for yield enhancement. Recognizing this, the Thrivent Money Market Fund began to reallocate its investments, increasing its exposure to floating-rate obligations. This strategic pivot allowed the fund to benefit directly from the higher SOFR rates, ensuring that its portfolio remained responsive to current market conditions and continued to generate competitive returns.
Throughout these strategic adjustments, the fund maintained an unwavering commitment to credit quality. The portfolio's investments remained exclusively in U.S. government or government agency-related securities, underscoring a conservative and risk-averse approach. This focus on high-quality assets provided stability and security for investors, mitigating potential credit risks during a period of market uncertainty and transition.
Looking ahead, the Federal Funds futures market indicates a strong likelihood of further monetary easing. Projections suggest a high probability that the Fed will implement another 25-basis-point cut at its next Federal Open Market Committee (FOMC) meeting, scheduled for October 29. This forward-looking market sentiment suggests that the fund's adaptable strategy, balancing fixed-rate and floating-rate instruments, will continue to be crucial in navigating the evolving interest rate landscape and maximizing investor returns.
The Thrivent Money Market Fund demonstrated a flexible investment approach in Q3 2025, successfully responding to the Federal Reserve's rate adjustment and market shifts. By initially extending maturities and subsequently embracing floating-rate instruments, the fund capitalized on yield opportunities while upholding its commitment to high credit quality through investments in U.S. government and agency securities. This strategic agility positions the fund well for anticipated future rate movements, aiming to deliver consistent performance in a changing economic climate.