The recent volatility of high-yield bonds: Spreads widen though fundamentals stay strong

Size: px
Start display at page:

Download "The recent volatility of high-yield bonds: Spreads widen though fundamentals stay strong"

Transcription

1 Investment Insights The recent volatility of high-yield bonds: Spreads widen though fundamentals stay strong Kevin Lorenz, CFA, Managing Director, Lead Portfolio Manager of TIAA-CREF's High-Yield Fund Jean Lin, CFA, Managing Director, Co-Portfolio Manager of TIAA- CREF's High-Yield Fund Article Highlights After recording solid gains over the last few years, the high-yield bond market experienced a broad sell-off and increased volatility in May and June as investors reacted to rising interest rates across the fixed-income landscape. Because the increase in rates was so sudden, high-yield bonds responded more negatively than has been the case in previous periods of rising rates. High-yield corporate bond fundamentals remain strong, however, and the recent drop in prices and increased interest rates has made valuations more attractive. A strategic allocation to high yield continues to offer compelling long-term benefits. After producing double-digit gains in 2012 and solid returns through the first four months of 2013, high-yield bonds suddenly reversed course in May and into June. In the wake of sharply rising yields for U.S. Treasuries that began in early May, high-yield spreads, the difference between yields on higher-yielding, non-treasury securities and the 10-year Treasury note, reverted back to levels not seen since the end of The increase in spreads was dramatic over the last two months. Between May 9 and June 25, for example, the option-adjusted spread (OAS) on the BofA Merrill Lynch US Cash Pay High Yield Index widened by 109 basis points (from 417 to 526) even as the 10-year Treasury yield soared. 1 Widening spreads usually indicate increased risk for bond investors, though with improving economic fundamentals, we believe the recent increase in spreads has to do with investor jitters over the Treasury rate increase, not a changing outlook for corporations. The recent spread-widening in high yield did not indicate underperformance versus Treasuries, however. For the two-month period from May through June, high-yield returns (-2.37%, as measured by the BofA Merrill Lynch US Cash Pay High Yield Index) were ahead of both Treasuries (-2.79% for the Barclays U.S. Treasury Index) and investment-grade corporate bonds (-5.04% for the Barclays

2 Capital U.S. Corporate Investment Grade Bond Index) while lagging equities (+0.96% for the Standard & Poor s 500 Index). 2 The spike in volatility occurred over such a short timeframe that it created broadbased investor risk aversion, causing sharp fund outflows and price declines across many major asset classes in May and June. Markets have settled to some degree, but have not yet completely stabilized. Figure 1: High-yield spreads jumped in May and June Fast-rising Treasury yields concerned investors We do not believe the May-June selloff in high yield to have been a response to deteriorating credit fundamentals or rising default expectations. In fact, since the financial crisis, corporate balance sheets have strengthened, debt levels have declined and existing corporate debt has been extended and refinanced at lower rates. The U.S. economy has also perked up in recent months, particularly in the private sector, which has shown many signs of improvement. Employment, housing and consumer confidence have risen in Investors have been more focused in recent months on the statements coming from the U.S. Federal Reserve, rather than on an improving economy. The Fed has purchased $85 billion of bonds each month in an attempt to stimulate economic growth through its quantitative easing (QE) program, which is aimed at keeping interest rates very low in an effort to stimulate the economy. Investors have long feared that when the Fed stops purchasing bonds that prices would fall as interest rates increase. Fed comments in recent months have suggested that it would taper or reduce QE purchases sometime this year, which prompted investors to sell before it happens.

3 The role of high-yield bonds in a diversified portfolio With the recent volatility, some investors may question whether high-yield bonds belong in their portfolios. Regardless of where we are in the economic or market cycle, high-yield fixed income plays an important role in generating potentially attractive risk-adjusted returns and providing potential diversification for investors. High yield should be regarded as a core, long-term holding in most portfolios. High-yield bonds generate returns through a higher yield (coupon) than can be found in other fixed-income instruments; the higher yields compensate for potential price volatility and elevated default risk. From , high-yield securities outperformed broad indices of stocks and bonds, generating returns superior to those of investment-grade fixed income and comparable to equities with less volatility (see below). High yield (Bank of America Merrill Lynch High Yield Master Index) High-grade corporate bonds (Bank of America Merrill Lynch High Grade Corporate Index) Big stocks (Standard & Poor s Index of 500 Common Stocks) Small stocks (Russell 2000 Index) Average Annual Return (%) Standard Deviation High yield therefore can be said to occupy a middle ground, as the asset class exhibits risk and return characteristics that lie somewhere between those of stocks and investment-grade bonds, while maintaining several unique characteristics, including: Diversification High-yield bonds have a low correlation with other varieties of fixed income. Importantly, they are negatively correlated with U.S. Treasuries. And because of their low correlation with equities, they could also potentially reduce volatility in stock portfolios. 3 Low duration High-yield bonds, because they have higher coupons and tend to have maturities of 10 years or less, display relatively low sensitivity to interest rates. Like other bonds, high yield has experienced short-term volatility during the extraordinary fluctuations of interest rates over the past 15 years, but the effects of such fluctuations tend to smooth out over time. The spread of high-yield bonds over investment-grade or Treasuries can narrow when rates rise without necessarily

4 eroding prices; today s elevated spread, given the historically low default rates currently prevailing, may provide a wider margin of protection. Coupon income High-yield bonds have experienced extraordinary demand in recent years as investors reached for yield amid the unprecedented low interest rate environment. This has driven up prices, limiting their potential for price appreciation. But short-term price fluctuations tend to cancel each other out; in the long run, the income component of high yield comes to dominate total returns and account for its historical out-performance. What happens when interest rates rise? After several years of post-crisis interest rates hovering around record lows, many market participants are anticipating an eventual rise in interest rates. Interest rates generally climb amid economic recovery, growth and inflation. In these kinds of markets, investor risk appetite rises, which may cause investors to favor high-yield bonds over other types of bonds. For their part, issuers experiencing improved profitability and cash-flow generation exhibit reduced credit and default risk, improving the risk characteristics of their highyield debt. In a rising interest rate environment, elevated risk appetite and improving credit characteristics have driven high-yield debt to outperform other fixed income securities. Although high-yield spreads have recently defied conventional wisdom by widening rather than narrowing, over longer periods during which rates increased more gradually, high yield has generally performed as expected. For example, between July 24, 2012, and June 19, 2013, a period of 330 days, the 10-year Treasury yield rose 91 basis points. At the same time, high-yield spreads narrowed by 152 basis points (from 630 to 478 bps). A long-term focus provides more insight into how highyield is likely to behave when markets are not subject to unusual pressures and anomalies, such as the potential slowdown or end of the Fed s monthly bond buying program. High-yield fundamentals remain strong The economic strengthening that has fueled speculation about Fed tapering and sent markets tumbling is the same economic strengthening that provides a favorable backdrop for high-yield investing over the long term. We believe the high-yield market will continue to improve on a fundamental basis. With fundamentals on solid footing, the widening of spreads has created clear buying opportunities. High-yield valuations are more favorable now than they were a month ago.

5 High-yield investors should avoid the temptation to get caught up in short-term price and spread volatility and focus instead on long-term fundamentals such as economic growth and default risks. A strategic allocation to high yield continues to offer compelling benefits for diversified, long-term investors. For more information on TIAA-CREF s views on high-yield investing, read our white paper, "The enduring case for high-yield bonds." 1 Option-adjusted spreads measure the relative value of fixed-income securities that contain an embedded option (such as a call provision in a corporate bond); they are quoted as a spread, or differential, over a benchmark security in this case, the 10-year U.S. Treasury yield. The wider the option-adjusted spread, the higher the implied return and risk of the bond, compared with the benchmark. 2 It is not possible to invest in an index. Performance for indices does not reflect investment fees or transaction costs. 3 For example, from 1993 to 2012, high-yield bond returns have exhibited negative correlation to Treasuries (-0.10), low correlation to high-grade corporate bonds (0.56), and relatively low correlation to equities (0.62). High-yield bonds are subject to interest rate and inflation risks, and have significantly higher credit risk than investment-grade bonds. The material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons. Past performance does not guarantee future results. TIAA-CREF Asset Management provides investment advice and portfolio management services to the TIAA-CREF group of companies through the following entities: Teachers Advisors, Inc., TIAA-CREF Investment Management, LLC, and Teachers Insurance and Annuity Association (TIAA ). Teachers Advisors, Inc., is a registered investment adviser and wholly owned subsidiary of Teachers Insurance and Annuity Association (TIAA). TIAA, TIAA-CREF, Teachers Insurance and Annuity Association, TIAA-CREF Asset Management and FINANCIAL SERVICES FOR THE GREATER GOOD are registered trademarks of Teachers Insurance and Annuity Association Teachers Insurance and Annuity Association-College Retirement Equities Fund (TIAA-CREF), 730 Third Avenue, New York, NY C11461

Documeent title on one or two. high-yield bonds. Executive summary. W Price (per $100 par) W. The diversification merits of high-yield bonds

Documeent title on one or two. high-yield bonds. Executive summary. W Price (per $100 par) W. The diversification merits of high-yield bonds April 01 TIAA-CREF Asset Management Documeent title on one or two The lines enduring Gustan case Book for pt high-yield bonds TIAA-CREF High-Yield Strategy Kevin Lorenz, CFA Managing Director Co-portfolio

More information

For high-yield bonds, market volatility can bring new opportunities

For high-yield bonds, market volatility can bring new opportunities Investment Perspectives For high-yield bonds, market volatility can bring new opportunities Kevin Lorenz and Jean Lin, portfolio managers for TIAA-CREF High-Yield Fund Article Highlights: The decline in

More information

Documeent title on one or two. high-yield bonds. Executive summary. W Price (per $100 par) W Yield to worst 110

Documeent title on one or two. high-yield bonds. Executive summary. W Price (per $100 par) W Yield to worst 110 April 2014 TIAA-CREF Asset Management Documeent title on one or two The lines enduring Gustan case Book for 24pt high-yield bonds TIAA-CREF High-Yield Strategy Kevin Lorenz, CFA Managing Director Portfolio

More information

Documeent title on one or two. high-yield bonds. Executive summary. W Price (per $100 par) W Yield to worst 110

Documeent title on one or two. high-yield bonds. Executive summary. W Price (per $100 par) W Yield to worst 110 May 2015 TIAA-CREF Asset Management Documeent title on one or two The lines enduring Gustan case Book for 24pt high-yield bonds TIAA-CREF High-Yield Strategy Kevin Lorenz, CFA Managing Director Portfolio

More information

Over a barrel: Causes and consequences of the fall in oil prices

Over a barrel: Causes and consequences of the fall in oil prices November 14, 2014 Over a barrel: Causes and consequences of the fall in oil prices Executive Summary The $30 fall in oil prices since July reflects greater U.S. supply as well as worries about a significant

More information

for rising interest rates

for rising interest rates Fall 1 Documeent title on one or two Positioning lines in Gustan bond Book portfolios pt for rising interest rates Stephen MacDonald, CFA Managing Director Client Portfolio Management Peter Moore Director

More information

Fixed-income opportunity: Short duration high yield

Fixed-income opportunity: Short duration high yield March 2014 Insights from: An income solution for a low or rising interest-rate environment Generating income is a key objective for many investors, and one that is increasingly difficult to achieve in

More information

High Yield Bonds in a Rising Rate Environment August 2014

High Yield Bonds in a Rising Rate Environment August 2014 This paper examines the impact rising rates are likely to have on high yield bond performance. We conclude that while a rising rate environment would detract from high yield returns, historically returns

More information

CALVERT UNCONSTRAINED BOND FUND A More Expansive Approach to Fixed-Income Investing

CALVERT UNCONSTRAINED BOND FUND A More Expansive Approach to Fixed-Income Investing CALVERT UNCONSTRAINED BOND FUND A More Expansive Approach to Fixed-Income Investing A Challenging Environment for Investors MOVING BEYOND TRADITIONAL FIXED-INCOME INVESTING ALONE For many advisors and

More information

Finding income and managing risk in a near-zero interest-rate environment

Finding income and managing risk in a near-zero interest-rate environment Aging Workforce Series Finding income and managing risk in a near-zero interest-rate environment William Martin, Head of Fixed-Income Portfolio Management TIAA-CREF Executive Summary Yields in traditional

More information

Bond Fund Investing in a Rising Rate Environment

Bond Fund Investing in a Rising Rate Environment MUTUAL FUND RESEARCH Danette Szakaly Ext. 71937 Date Issued: 1/14/11 Fund Investing in a Rising Rate Environment The recent rise in U.S. Treasury bond yields has some investors wondering how to manage

More information

Why Consider Bank Loan Investing?

Why Consider Bank Loan Investing? Why Consider Bank Loan Investing? September 2012 Bank loans continue to increase in popularity among a variety of investors in search of higher yield potential than other types of bonds, with lower relative

More information

Real estate: The impact of rising interest rates

Real estate: The impact of rising interest rates Fall 015 TIAA-CREF Asset Management Real estate: The impact of rising interest rates Overview TIAA-CREF Global Real Estate Strategy & Research Martha Peyton, Ph.D. Managing Director Edward F. Pierzak,

More information

Finding yield in dividendpaying

Finding yield in dividendpaying Market & Investment Insights Finding yield in dividendpaying stocks Mike Holbert, Portfolio Manager, Active Equities Article Highlights: Low interest rates have spurred investors to search for yield outside

More information

A case for high-yield bonds

A case for high-yield bonds By: Yoshie Phillips, CFA, Senior Research Analyst MAY 212 A case for high-yield bonds High-yield bonds have historically produced strong returns relative to those of other major asset classes, including

More information

Documeent title on one or two lines in Gustan Book 24pt Commercial mortgages are HOT!

Documeent title on one or two lines in Gustan Book 24pt Commercial mortgages are HOT! TIAA-CREF Asset Management Documeent title on one or two lines in Gustan Book pt Commercial mortgages are HOT! Martha Peyton, Ph.D., Managing Director TIAA-CREF Global Real Estate, Strategy & Research

More information

Convertibles: An investment solution for Insurance portfolios in challenging times

Convertibles: An investment solution for Insurance portfolios in challenging times Convertibles: An investment solution for Insurance portfolios in challenging times By: Ravi Malik, CFA April 2013 Introduction In recent years the Federal Reserve has implemented unprecedented monetary

More information

Impact of rising interest rates on preferred securities

Impact of rising interest rates on preferred securities Impact of rising interest rates on preferred securities This report looks at the risks preferred investors may face in a rising-interest-rate environment. We are currently in a period of historically low

More information

Holding the middle ground with convertible securities

Holding the middle ground with convertible securities January 2015» White paper Holding the middle ground with convertible securities Eric N. Harthun, CFA Portfolio Manager Robert L. Salvin Portfolio Manager Key takeaways Convertible securities are an often-overlooked

More information

Investment insight. Fixed income the what, when, where, why and how TABLE 1: DIFFERENT TYPES OF FIXED INCOME SECURITIES. What is fixed income?

Investment insight. Fixed income the what, when, where, why and how TABLE 1: DIFFERENT TYPES OF FIXED INCOME SECURITIES. What is fixed income? Fixed income investments make up a large proportion of the investment universe and can form a significant part of a diversified portfolio but investors are often much less familiar with how fixed income

More information

With interest rates at historically low levels, and the U.S. economy showing continued strength,

With interest rates at historically low levels, and the U.S. economy showing continued strength, Managing Interest Rate Risk in Your Bond Holdings THE RIGHT STRATEGY MAY HELP FIXED INCOME PORTFOLIOS DURING PERIODS OF RISING INTEREST RATES. With interest rates at historically low levels, and the U.S.

More information

A case for high-yield bonds

A case for high-yield bonds By: Yoshie Phillips, CFA, Senior Research Analyst AUGUST 212 A case for high-yield bonds High-yield bonds have historically produced strong returns relative to those of other major asset classes, including

More information

interest-rate environment

interest-rate environment inter 14 TIAA-CREF Asset Management Documeent title on one or two Lifecycle lines in Funds Gustan in Book a rising 24pt interest-rate environment Elina Steinberg Director, Client Portfolio Management TIAA-CREF

More information

Unconstrained fixed income may offer a compelling solution for today s bond market challenges

Unconstrained fixed income may offer a compelling solution for today s bond market challenges INVESTMENT OPPORTUNITIES The market direction and your portfolio Unconstrained fixed income may offer a compelling solution for today s bond market challenges Why now? n Elevated risks and prolonged dismal

More information

Bond Market Perspectives

Bond Market Perspectives LPL FINANCIAL RESEARCH Bond Market Perspectives March 26, 2013 High-Yield Bonds and the Credit Cycle Anthony Valeri, CFA Market Strategist LPL Financial Highlights More speculative issuance has increased

More information

Fixed Income Liquidity in a Rising Rate Environment

Fixed Income Liquidity in a Rising Rate Environment Fixed Income Liquidity in a Rising Rate Environment 2 Executive Summary Ò Fixed income market liquidity has declined, causing greater concern about prospective liquidity in a potential broad market sell-off

More information

Wells Fargo Advantage High Yield Bond Fund

Wells Fargo Advantage High Yield Bond Fund All information is as of 9-30-15 unless otherwise indicated. General fund information Ticker: EKHIX Portfolio managers: Margaret D. Patel Subadvisor: Wells Capital Management, Inc. Category: High-yield

More information

Understanding Fixed Income

Understanding Fixed Income Understanding Fixed Income 2014 AMP Capital Investors Limited ABN 59 001 777 591 AFSL 232497 Understanding Fixed Income About fixed income at AMP Capital Our global presence helps us deliver outstanding

More information

Understanding the causes and implications of a less liquid trading environment. Executive summary

Understanding the causes and implications of a less liquid trading environment. Executive summary Fall 2015 TIAA-CREF Asset Management Reduced Documeent liquidity: title A on new one reality or two for lines fixed-income in Gustan Book markets 24pt Understanding the causes and implications of a less

More information

Global high yield: We believe it s still offering value December 2013

Global high yield: We believe it s still offering value December 2013 Global high yield: We believe it s still offering value December 2013 02 of 08 Global high yield: we believe it s still offering value Patrick Maldari, CFA Senior Portfolio Manager North American Fixed

More information

Opportunities in credit higher quality high-yield bonds

Opportunities in credit higher quality high-yield bonds Highlights > > Default rates below the long-term average > > Valuations wide of historical average in BB and B rated credit > > Despite sluggish economy, high yield can still perform well > > High yield

More information

The Impact of Interest Rates on Real Estate Securities

The Impact of Interest Rates on Real Estate Securities The Impact of Interest Rates on Real Estate Securities The challenge for real estate securities investors is determining how monetary policy and interest rates affect prices and returns. Highlights Not

More information

2013 global economic outlook: Are promising growth trends sustainable? Timothy Hopper, Ph.D., Chief Economist, TIAA-CREF January 24, 2013

2013 global economic outlook: Are promising growth trends sustainable? Timothy Hopper, Ph.D., Chief Economist, TIAA-CREF January 24, 2013 2013 global economic outlook: Are promising growth trends sustainable? Timothy Hopper, Ph.D., Chief Economist, TIAA-CREF January 24, 2013 U.S. stock market performance in 2012 * +12.59% total return +6.35%

More information

Risk Control and Equity Upside: The Merits of Convertible Bonds for an Insurance Portfolio

Risk Control and Equity Upside: The Merits of Convertible Bonds for an Insurance Portfolio Risk Control and Equity Upside: The Merits of Convertible Bonds for an Insurance Portfolio In a survey of insurance company Chief Investment Officers conducted by Eager, Davis & Holmes 1 in May 2009, 43%

More information

The timeless (and timely) case for high-yield bonds

The timeless (and timely) case for high-yield bonds INCOME EATON VANCE Looking beyond traditional sources of yield MARCH 2016 TIMELY THINKING The timeless (and timely) case for high-yield bonds SUMMARY High-yield bonds occupy a special capital market niche:

More information

A leveraged. The Case for Leveraged Loans. Introduction - What is a Leveraged Loan?

A leveraged. The Case for Leveraged Loans. Introduction - What is a Leveraged Loan? PENN Capital Management The Navy Yard Corporate Center 3 Crescent Drive, Suite 400 Philadelphia, PA 19112 Phone: 215-302-1501 www.penncapital.com For more information: Christian Noyes, Senior Managing

More information

2013 global equity outlook: Searching for alpha in a stock picker s market

2013 global equity outlook: Searching for alpha in a stock picker s market March 2013 2013 global equity outlook: Searching for alpha in a stock picker s market Saira Malik, Head of Global Equity Research, TIAA-CREF Executive summary The outlook for equity markets is favorable

More information

The case for high yield

The case for high yield The case for high yield Jennifer Ponce de Leon, Vice President, Senior Sector Leader Wendy Price, Director, Institutional Product Management We believe high yield is a compelling relative investment opportunity

More information

High Yield Bonds A Primer

High Yield Bonds A Primer High Yield Bonds A Primer With our extensive history in the Canadian credit market dating back to the Income Trust period, our portfolio managers believe that there is considerable merit in including select

More information

The Case for Senior Loans

The Case for Senior Loans The Case for 1.877.622.5552 www.firsttrust.ca : A Potential Opportunity for Investors With interest rates at historically low levels, these are challenging times to invest for income. At the same time,

More information

to Wealth Management resources of one of the world s largest financial services firms. The Caribbean Group

to Wealth Management resources of one of the world s largest financial services firms. The Caribbean Group A Defined Approach to Wealth Management Giving UWI access to the combined resources of one of the world s largest financial services firms. The Caribbean Group The information in this presentation is intended

More information

The Search for Yield Continues: A Re-introduction to Bank Loans

The Search for Yield Continues: A Re-introduction to Bank Loans INSIGHTS The Search for Yield Continues: A Re-introduction to Bank Loans 203.621.1700 2013, Rocaton Investment Advisors, LLC Executive Summary With the Federal Reserve pledging to stick to its zero interest-rate

More information

NORTHERN TRUST HIGH YIELD FIXED INCOME QUARTERLY UPDATE. Highlighting attribution, economic and market analysis

NORTHERN TRUST HIGH YIELD FIXED INCOME QUARTERLY UPDATE. Highlighting attribution, economic and market analysis NORTHERN TRUST HIGH YIELD FIXED INCOME QUARTERLY UPDATE Highlighting attribution, economic and market analysis December 31, 2015 Northern Trust Asset Management 50 South La Salle Street Chicago, Illinois

More information

Understanding Fixed Income Returns: Past, Present and Future by Stephen Kroah,CFA

Understanding Fixed Income Returns: Past, Present and Future by Stephen Kroah,CFA Understanding Fixed Income Returns: Past, Present and Future by Stephen Kroah,CFA In today s economic environment, much discussion is centered around the impact of rising interest rates on fixed income

More information

High Yield Fixed Income Credit Outlook

High Yield Fixed Income Credit Outlook High Yield Fixed Income Credit Outlook Brendan White, CFA Portfolio Manager, Touchstone High Yield Fund Fort Washington Investment Advisors, Inc. September 28, 2011 The opinions expressed are current as

More information

BOND ALERT. What Investors Should Know. July 2013 WWW.LONGVIEWCPTL.COM 2 MILL ROAD, SUITE 105

BOND ALERT. What Investors Should Know. July 2013 WWW.LONGVIEWCPTL.COM 2 MILL ROAD, SUITE 105 BOND ALERT July 2013 What Investors Should Know This special report will help you understand the current environment for bonds and discuss how that environment may change with rising interest rates. We

More information

Taxable Fixed Income Outlook: Waiting for Those Rising Rates

Taxable Fixed Income Outlook: Waiting for Those Rising Rates Taxable Fixed Income Outlook: Waiting for Those Rising Rates Market Commentary Fourth quarter 2014 MOST INVESTORS UNDERSTAND THAT INTEREST RATES ARE UNPREDICTABLE. But we suspect few believed rates could

More information

Pioneer Bond Fund. Performance Analysis & Commentary September 2015. Fund Ticker Symbols: PIOBX (Class A); PICYX (Class Y) us.pioneerinvestments.

Pioneer Bond Fund. Performance Analysis & Commentary September 2015. Fund Ticker Symbols: PIOBX (Class A); PICYX (Class Y) us.pioneerinvestments. Pioneer Bond Fund COMMENTARY Performance Analysis & Commentary September 2015 Fund Ticker Symbols: PIOBX (Class A); PICYX (Class Y) us.pioneerinvestments.com Third Quarter Review Pioneer Bond Fund s Class

More information

Fixed Income Review. Second Quarter 2015

Fixed Income Review. Second Quarter 2015 Second Quarter 2015 As of June 30, 2015 Total Return Performance Calendar Year Performance Index MTD QTD YTD 2014 2013 2012 Barclays US Aggregate -1.1% -1.7% -0.1% 6.0% -2.0% 4.2% BAML US Agency Index

More information

SHORT DURATION BONDS

SHORT DURATION BONDS SHORT DURATION BONDS Our Short Duration Bond Fund range RL Short Duration Gilt Fund RL Short Duration Global Index Linked Bond Fund RL Short Duration Credit Fund RL Duration Hedged Credit Fund RL Short

More information

KDP ASSET MANAGEMENT, INC.

KDP ASSET MANAGEMENT, INC. ASSET MANAGEMENT, INC. High Yield Bond and Senior Secured Bank Loan Outlook October 2015 Asset Management, Inc. 24 Elm Street Montpelier, Vermont 802.223.0440 HighYield@kdpam.com This is an analytical

More information

A Solution for Yield-Starved Insurance Companies: Dividend Equities

A Solution for Yield-Starved Insurance Companies: Dividend Equities August 2015 A Solution for Yield-Starved Insurance Companies: Dividend Equities Federal Reserve efforts to normalize monetary policy are unlikely to provide meaningful relief for yield-starved insurance

More information

An actively managed approach for today s fixed-income markets

An actively managed approach for today s fixed-income markets Q3 2015 Putnam multi-sector fixed-income funds An actively managed approach for today s fixed-income markets D. William Kohli Michael V. Salm Paul D. Scanlon, CFA Putnam s three Co-Heads of Fixed each

More information

High-Yield Spread U.S. 10-Year Treasury Yield Investment Grade Spread

High-Yield Spread U.S. 10-Year Treasury Yield Investment Grade Spread WisdomTree ETFs BOFA MERRILL LYNCH HIGH YIELD BOND ZERO DURATION FUND HYZD The U.S. high-yield bond market has been one of the best-performing subsets of the fixed income investable universe over the past

More information

The timeless (and timely) case for high-yield bonds

The timeless (and timely) case for high-yield bonds EATON VANCE TOPIC PAPER MAY 2016 The timeless (and timely) case for high-yield bonds Michael Weilheimer, CFA Director High-Yield Investments Steve Concannon Portfolio Manager High-Yield Investments Jeff

More information

Pioneer High Yield Fund

Pioneer High Yield Fund Pioneer High Yield Fund COMMENTARY Performance Analysis & Commentary September 2015 Fund Ticker Symbols: TAHYX (Class A); TYHYX (Class Y) us.pioneerinvestments.com Third Quarter Review Pioneer High Yield

More information

2015 Mid-Year Market Review

2015 Mid-Year Market Review 2015 Mid-Year Market Review Cedar Hill Associates, LLC www.cedhill.com 6111 North River Road, Suite 1100, Rosemont, Illinois 60018 Phone: 312/445-2900 An Affiliate of MB Financial Bank 2015 Major Investment

More information

Seeking a More Efficient Fixed Income Portfolio with Asia Bonds

Seeking a More Efficient Fixed Income Portfolio with Asia Bonds Seeking a More Efficient Fixed Income Portfolio with Asia s Seeking a More Efficient Fixed Income Portfolio with Asia s Drawing upon different drivers for performance, Asia fixed income may improve risk-return

More information

Economic & Market Outlook

Economic & Market Outlook Monthly Portfolio Commentary December 31, 2015 Economic & Market Outlook Stocks rebounded in 2015 s fourth quarter, but provided little reward for the year as a whole. The S&P 500 Index recovered from

More information

Why high-yield municipal bonds may be attractive in today s market environment

Why high-yield municipal bonds may be attractive in today s market environment Spread Why high-yield municipal bonds may be attractive in today s market environment February 2014 High-yield municipal bonds may be attractive given their: Historically wide spreads Attractive prices

More information

PIONEER ADVISORY: Pioneer Absolute Return Credit Fund Name Change

PIONEER ADVISORY: Pioneer Absolute Return Credit Fund Name Change May 2013 PIONEER ADVISORY: Pioneer Absolute Return Credit Fund Name Change Effective June 17, 2013, the Fund s name will change to Pioneer Dynamic Credit Fund. It should be noted that the Fund s portfolio

More information

Bob Zenouzi Discusses Delaware s Dividend Income Fund

Bob Zenouzi Discusses Delaware s Dividend Income Fund Bob Zenouzi Discusses Delaware s Dividend Income Fund October 12, 2015 by Robert Huebscher Bob Zenouzi is the lead manager of the real estate securities and income solutions (RESIS) group at Delaware Investments,

More information

An Alternative Way to Diversify an Income Strategy

An Alternative Way to Diversify an Income Strategy Senior Secured Loans An Alternative Way to Diversify an Income Strategy Alternative Thinking Series There is no shortage of uncertainty and risk facing today s investor. From high unemployment and depressed

More information

Senior Floating Rate Loans

Senior Floating Rate Loans Senior floating rate loans have become a staple of the U.S. debt market and have grown from a market value of $126 billion in 2001 to $607 billion as of year-end 2011. 1 For over 20 years, managed senior

More information

INSTITUTIONAL INVESTMENT & FIDUCIARY SERVICES: Building a Better Portfolio: The Case for High Yield Bonds

INSTITUTIONAL INVESTMENT & FIDUCIARY SERVICES: Building a Better Portfolio: The Case for High Yield Bonds 14\GBS\22\25062C.docx INSTITUTIONAL INVESTMENT & FIDUCIARY SERVICES: Building a Better Portfolio: The Case for High Yield Bonds By Adam Marks, Area Vice President and Jamia Canlas, Senior Analyst By looking

More information

T HE H ARTFORD F LOATING R ATE F UND Helping Investors Prepare for Rising Interest Rates

T HE H ARTFORD F LOATING R ATE F UND Helping Investors Prepare for Rising Interest Rates T HE H ARTFORD F LOATING R ATE F UND Helping Investors Prepare for Rising Interest Rates Michael J. Bacevich Portfolio Manager The Hartford Floating Rate Fund John P. Connor Portfolio Manager The Hartford

More information

NPH Fixed Income Research Update. Bob Downing, CFA. NPH Senior Investment & Due Diligence Analyst

NPH Fixed Income Research Update. Bob Downing, CFA. NPH Senior Investment & Due Diligence Analyst White Paper: NPH Fixed Income Research Update Authored By: Bob Downing, CFA NPH Senior Investment & Due Diligence Analyst National Planning Holdings, Inc. Due Diligence Department National Planning Holdings,

More information

High-yield bonds have become a global opportunity

High-yield bonds have become a global opportunity By: Yoshie Phillips, CFA, Senior Research Analyst APRIL 2013 High-yield bonds have become a global opportunity Investors seeking income or attractive total return investments often look into high-yield

More information

Opportunity in High Yield Bonds

Opportunity in High Yield Bonds Research Opportunity in High Yield Bonds 2016 Q1 Quarterly Commentary Weyland Capital Management LLC - 22 Deer Street - Portsmouth, New Hampshire 03801 p. 603.433.8994 www.weyland.com This document reflects

More information

Floating-Rate Securities

Floating-Rate Securities Floating-Rate Securities A floating-rate security, or floater, is a debt security whose coupon rate is reset at designated dates and is based on the value of a designated reference rate. - Handbook of

More information

Bond Outlook. Third Quarter 2014. Waiting on the Fed. 10-Year Treasury Yields. Treasury Bonds. Break-even Inflation Rate

Bond Outlook. Third Quarter 2014. Waiting on the Fed. 10-Year Treasury Yields. Treasury Bonds. Break-even Inflation Rate Third Quarter 21 Waiting on the Fed Despite a strong rebound in domestic economic activity with gross domestic production accelerating toward %, persistent low inflationary pressures and dramatically lower

More information

Bond Fund of the TIAA-CREF Life Funds

Bond Fund of the TIAA-CREF Life Funds Summary Prospectus MAY 1, 2015 Bond Fund of the TIAA-CREF Life Funds Ticker: TLBDX Before you invest, you may want to review the Fund s prospectus, which contains more information about the Fund and its

More information

NORTHERN TRUST ACTIVE FIXED INCOME QUARTERLY UPDATE. Core/Core Plus Investment Strategy

NORTHERN TRUST ACTIVE FIXED INCOME QUARTERLY UPDATE. Core/Core Plus Investment Strategy NORTHERN TRUST ACTIVE FIXED INCOME QUARTERLY UPDATE Core/Core Plus Investment Strategy SUMMARY: The Northern Fixed Income Fund (NOFIX)*and Northern Core Bond Fund (NOCBX)** both received four-star overall

More information

An Alternative to Fixed Rate Bonds

An Alternative to Fixed Rate Bonds An Alternative to Fixed Rate Bonds Voya Senior Loans Suite offered by Aston Hill Financial Seeks to pay high income in various rate environments One of the world s largest dedicated senior loan teams Five

More information

Overview of Your TIAA-CREF Investment Solutions SM Accounts

Overview of Your TIAA-CREF Investment Solutions SM Accounts Overview of Your TIAA-CREF Investment Solutions SM Accounts TIAA-CREF Investment Solutions SM now offers you nine mutual funds in addition to our fixed and variable annuity accounts. TIAA-CREF Investment

More information

NORTHERN TRUST ACTIVE FIXED INCOME QUARTERLY UPDATE. Core/Core Plus Investment Strategy

NORTHERN TRUST ACTIVE FIXED INCOME QUARTERLY UPDATE. Core/Core Plus Investment Strategy NORTHERN TRUST ACTIVE FIXED INCOME QUARTERLY UPDATE Core/Core Plus Investment Strategy December 31, 2014 Northern Trust Asset Management 50 South La Salle Street Chicago, Illinois 60603 northerntrust.com

More information

2012 First Quarter Equity Market Review

2012 First Quarter Equity Market Review Investment Insights 2012 First Quarter Equity Market Review By William Riegel, Head of Equity Investments After a volatile year in 2011, equity markets grew more confident in the first quarter of 2012.

More information

High Yield Credit: An Evaluation for Prospective Insurance Company Investors

High Yield Credit: An Evaluation for Prospective Insurance Company Investors High Yield Credit: An Evaluation for Prospective Insurance Company Investors Low interest rates challenging traditional insurance company business model More insurance companies using high yield to mitigate

More information

Six Strategies for Volatile Markets When markets get choppy, it pays to have a plan for your investments, and to stick to it.

Six Strategies for Volatile Markets When markets get choppy, it pays to have a plan for your investments, and to stick to it. Six Strategies for Volatile Markets When markets get choppy, it pays to have a plan for your investments, and to stick to it. Fidelity Viewpoints 8/22/15 The markets have become volatile again, prompted

More information

Today s bond market is riskier and more volatile than in several generations. As

Today s bond market is riskier and more volatile than in several generations. As Fixed Income Approach 2014 Volume 1 Executive Summary Today s bond market is riskier and more volatile than in several generations. As interest rates rise so does the anxiety of fixed income investors

More information

May 1, 2015 as amended June 1, 2015

May 1, 2015 as amended June 1, 2015 INSTITUTIONAL INVESTOR May 1, 2015 as amended June 1, 2015 DATE TARGET FUNDS MyDestination 2005 Fund MyDestination 2015 Fund MyDestination 2025 Fund MyDestination 2035 Fund MyDestination 2045 Fund MyDestination

More information

A GUIDE TO FLOATING RATE BANK LOANS:

A GUIDE TO FLOATING RATE BANK LOANS: Contact information: Advisor Services: (631) 629-4908 E-mail: info@catalystmf.com Website: www.catalystmf.com A GUIDE TO FLOATING RATE BANK LOANS: An Attractive Investment for a Rising Interest Rate Environment

More information

How close are we to the end of the credit cycle?

How close are we to the end of the credit cycle? How close are we to the end of the credit cycle? SIGMA Credit Risk Premium Group October 214 Executive summary Investors in fixed income should bear in mind an observation from the veteran investor Howard

More information

ANY GAS LEFT IN THE HIGH-YIELD MUNICIPAL TANK?

ANY GAS LEFT IN THE HIGH-YIELD MUNICIPAL TANK? May 9, 2016 ANY GAS LEFT IN THE HIGH-YIELD MUNICIPAL TANK? A favorable credit environment and technical factors have contributed to strong high-yield municipal performance. We see limited room for further

More information

Guide to mutual fund investing. Start with the basics

Guide to mutual fund investing. Start with the basics Guide to mutual fund investing Start with the basics Pursue your financial goals Why do you invest? For a rainy day? A secure retirement? Funding a college tuition? Having a specific goal in mind will

More information

The role of floating-rate bank loans in institutional portfolios

The role of floating-rate bank loans in institutional portfolios By: Martin Jaugietis, CFA; Director, Head of Liability Driven Investment Solutions DECEMBER 2011 Yoshie Phillips, CFA, Senior Research Analyst Maniranjan Kumar, Associate The role of floating-rate bank

More information

FIXED INCOME INVESTORS HAVE OPTIONS TO INCREASE RETURNS, LOWER RISK

FIXED INCOME INVESTORS HAVE OPTIONS TO INCREASE RETURNS, LOWER RISK 1 FIXED INCOME INVESTORS HAVE OPTIONS TO INCREASE RETURNS, LOWER RISK By Michael McMurray, CFA Senior Consultant As all investors are aware, fixed income yields and overall returns generally have been

More information

Market Bulletin. November 7, 2014. U.S. High Yield: A bubble set to burst?

Market Bulletin. November 7, 2014. U.S. High Yield: A bubble set to burst? November 7, 2014 U.S. High Yield: A bubble set to burst? Grace Tam, CFA Vide President Global Market Strategist J.P. Morgan Funds Katy Fang Research Analyst J.P. Morgan Funds Tai Hui Managing Director

More information

BERYL Credit Pulse on High Yield Corporates

BERYL Credit Pulse on High Yield Corporates BERYL Credit Pulse on High Yield Corporates This paper will summarize Beryl Consulting 2010 outlook and hedge fund portfolio construction for the high yield corporate sector in light of the events of the

More information

Active vs. Passive in Fixed Income Funds

Active vs. Passive in Fixed Income Funds Active vs. Passive in Fixed Income Funds White Paper February 2015 Not FDIC Insured May Lose Value No Bank Guarantee For Not financial FDIC Insured professional May Lose use Value only. Not Bank for inspection

More information

Rethinking Fixed Income

Rethinking Fixed Income Rethinking Fixed Income Challenging Conventional Wisdom May 2013 Risk. Reinsurance. Human Resources. Rethinking Fixed Income: Challenging Conventional Wisdom With US Treasury interest rates at, or near,

More information

European high yield in 2015: a tale of two markets An M&G Investments Institutional briefing December 2015

European high yield in 2015: a tale of two markets An M&G Investments Institutional briefing December 2015 European high yield in 215: a tale of two markets An M&G Investments Institutional briefing December 215 Weakness in US high yield in the last months of 215 has highlighted the relative strength of the

More information

Are Unconstrained Bond Funds a Substitute for Core Bonds?

Are Unconstrained Bond Funds a Substitute for Core Bonds? TOPICS OF INTEREST Are Unconstrained Bond Funds a Substitute for Core Bonds? By Peter Wilamoski, Ph.D. Director of Economic Research Philip Schmitt, CIMA Senior Research Associate AUGUST 2014 The problem

More information

TIAA-CREF Asset Management. Global capabilities Recognized performance

TIAA-CREF Asset Management. Global capabilities Recognized performance TIAA-CREF Asset Management Global capabilities Recognized performance Earning our clients trust since 1918 TIAA-CREF s greatest assets are the lasting relationships we ve developed and maintained since

More information

How Smaller Stocks May Offer Larger Returns

How Smaller Stocks May Offer Larger Returns Strategic Advisory Solutions April 2015 How Smaller Stocks May Offer Larger Returns In an environment where the US continues to be the growth engine of the developed world, investors may find opportunity

More information

Long duration bond benchmarks for corporate pension plans

Long duration bond benchmarks for corporate pension plans By: Yoshie Phillips, CFA, Senior Research Analyst OCTOBER 2011 Long duration bond benchmarks for corporate pension plans Issue: With the growth of liability-driven investing (LDI), many corporate pension

More information

MainStay VP Janus Balanced Portfolio

MainStay VP Janus Balanced Portfolio Summary Prospectus May 1, 2015 MainStay VP Janus Balanced Portfolio To Statutory Prospectus To Statement of Additional Information Before you invest, you may want to review the Portfolio's Prospectus,

More information

Risks and Rewards in High Yield Bonds

Risks and Rewards in High Yield Bonds Risks and Rewards in High Yield Bonds Peter R. Duffy, CFA, Partner, Senior Portfolio Manager Navy Yard Corporate Center, Three Crescent Drive, Suite 400, Philadelphia, PA 19112 www.penncapital.com 1 What

More information

TIAA-CREF Life Insurance Company. Single Premium Immediate Annuities. Step closer to meeting your lifetime income needs.

TIAA-CREF Life Insurance Company. Single Premium Immediate Annuities. Step closer to meeting your lifetime income needs. TIAA-CREF Life Insurance Company Single Premium Immediate Annuities Step closer to meeting your lifetime income needs. Securing a lifetime of retirement income TIAA-CREF: Financial services More than 90

More information

When Interest Rates Rise

When Interest Rates Rise Preferred Securities When Interest Rates Rise William Scapell, CFA, Director of Fixed Income and Portfolio Manager Jerry Dorost, CFA, Vice President and Research Analyst Edited by David Shanahan With the

More information