US Aggregate Bond Fund

Capital at risk. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

The listed funds are not an exhaustive list of funds available. Visit www.funds.troweprice.com to see the full range of funds offered by T. Rowe Price, including those that consider environmental and social characteristics as part of their investment process. For up to date information regarding any T. Rowe Price fund's investment strategy, please see the relevant fund KID and prospectus.

Overview

Manager's Outlook

We believe that U.S. growth will slow in the near term because of the looming prospect of reduced fiscal spending, tighter financial conditions (as seen in sharply higher U.S. mortgage rates, a stronger U.S. dollar, and a weak equity market), and declining purchasing power due to high inflation, and we have already begun to see some signs that the labor market is decelerating.

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While it is still uncertain if we are headed into a recession, recession risk appears to have increased as a result of the Fed's decision to prioritize the price stability part of its mandate until it sees convincing evidence that inflation, both headline and core, is coming down. Based on historical patterns, slowing growth and tighter monetary policy would argue for at least stability in the longer end of the yield curve. However, persistent inflation volatility has challenged this view. We continue to be attracted to adding duration in intermediate maturities as policy rates move into restrictive territory later this year while growth is likely slowing and inflation becoming less intense, making it more challenging for the Fed to aggressively tighten.��

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In this environment, volatility in both Treasury rates and risk assets is likely to continue as financial conditions turn more restrictive. This volatility should continue to help generate opportunities in various sectors to buy bonds at relatively attractive valuations, and we are maintaining ample liquidity so that we can add to these opportunities as they arise. Credit spreads have widened meaningfully, but we expect to maintain a defensive investment posture until the market more fully prices in recession risk or inflation calms enough to allow the Fed to pivot to a less hawkish policy stance.

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We continue to look to earn yield in the portfolio above the benchmark and to take advantage of the pricing inefficiencies that are prevalent in fixed income markets. As always, security selection remains paramount in our investment approach. �

Strategy

Fund Summary

Our approach is based on proprietary fundamental research and relative value analysis. The investment manager seeks to add value primarily through sector allocation, duration management, and security selection. The investment process places a strong emphasis on risk management practices and portfolio diversification to manage the overall risk profile. The promotion of environmental and/or social characteristics is achieved through the fund's commitment to maintain at least 10% of the value of its portfolio invested in Sustainable Investments, as defined by the SFDR. Additionally, we apply a proprietary responsible screen (exclusion list). The manager is not constrained by the fund’s benchmark, which is used for performance comparison purposes only.

Performance - Net of Fees

Past performance is not a reliable indicator of future performance.

31-Aug-2024 - Anna Dreyer, Co-Portfolio Manager,

The US investment-grade (IG) fixed income market, as measured by the Bloomberg US Aggregate Bond Index, recorded its fourth consecutive positive month in August as concerns about a slowing economy sent US Treasury yields lower. Within the portfolio, sector allocation produced mixed results. An underweight exposure to Treasuries and government agency debt combined with an overweight to agency mortgage-backed securities (MBS) slightly contributed to relative performance as MBS delivered the strongest excess returns in the benchmark. However, our underweight position to IG corporates, along with an out-of-benchmark allocation to collateralised loan obligations, offset some of these gains. Security selection was hampered by our preference for higher-coupon securities in the agency MBS sector. Higher coupons underperformed in the falling rate environment due to their shorter duration and higher prepayment risk relative to lower coupons. Our positioning in IG corporates was also a slight detractor. Meanwhile, interest rate management had an overall neutral impact on performance.

31-Jan-2024 - Steve Bartolini, Portfolio Manager,

We added to our allocations in Treasury inflation protected securities (TIPS) and asset-backed securities (ABS) during the month. We believe TIPS could benefit from a near-term rebound in economic data, while ABS looked attractive relative to corporate bonds. Conversely, we reduced our overweight allocation to investment-grade corporates as credit spreads tightened, while also increasing our underweight to nominal US Treasuries and reducing our position in the fundamentally challenged commercial mortgage-backed securities sector to near zero.

Past performance is not a reliable indicator of future performance.

The Funds are sub-funds of the T. Rowe Price Funds SICAV, a Luxembourg investment company with variable capital which is registered with Commission de Surveillance du Secteur Financier and which qualifies as an undertaking for collective investment in transferable securities (“UCITS”). Full details of the objectives, investment policies and risks are located in the prospectus which is available with the key investor information documents and/or key information document (KID) in English and in an official language of the jurisdictions in which the Funds are registered for public sale, together with the articles of incorporation and the annual and semi-annual reports (together “Fund Documents”). Any decision to invest should be made on the basis of the Fund Documents which are available free of charge from the local representative, local information/paying agent or from authorised distributors. They can also be found along with a summary of investor rights in English at www.troweprice.com. The Management Company reserves the right to terminate marketing arrangements.

Hedged share classes (denoted by 'h') utilise investment techniques to mitigate currency risk between the underlying investment currency(ies) of the fund and the currency of the hedged share class. The costs of doing so will be borne by the share class and there is no guarantee that such hedging will be effective.

Before deciding to invest in the fund, you should read the offering document/prospectus (including its investment objectives, policies and any risk warnings) which are available and may be obtained from any appointed distributors.

The specific securities identified and described in this website do not represent all of the securities purchased, sold, or recommended for the sub-fund and no assumptions should be made that the securities identified and discussed were or will be profitable.

A full list of the currently issued Share Classes including Distributing, Hedged, and Accumulating Categories may be obtained, free of charge and upon request, from the registered office of the Company.

Benchmark: Investors may use the benchmark to compare the fund’s performance. The benchmark has been selected because it is similar to the investment universe used by the investment manager and therefore acts as an appropriate comparator. The investment manager is not constrained by any country, sector and/or individual security weightings relative to the benchmark and has complete freedom to invest in securities that do not form part of the benchmark.

Disclosure on Vendor Indices can be found here.

Risks

Typical Investor