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Developing Custom IncomeTM that seeks to meet your needs is at the heart of what the Loomis Sayles CIS team does every day. Read their latest market insights and views below.

MONTHLY MARKET COMMENTS
  • Volatility in rates markets has been one of the themes during 2023 and April was no different. While the magnitude of volatility was perhaps muted, the curve inversion increased between the 3-month and 2-year nodes while yields compressed between 2's and 10-year points. We believe the outlook for rates has been influenced by expectations of both continued Fed tightening and banking sector friction coupled with concerns of the pending debt ceiling discussions and potential to use the ceiling as a point of political leverage. The US economy continued to remain resilient with a strong labor market, but we have seen signs of weakening in claims data as well as a number of leading indicators that still point toward recession. Global growth, as estimated by the IMF, was modestly reduced to 2.8% for 2023 as a function of elevated downside risks contributed by persistent financial stress.

  • Corporate spreads similarly witnessed volatility during the month of April, yet the index spread ended the month at approximately 136 bps, but 1 bp tighter over the month. This benign change during the month belied the concerns that remained in the regional banking sector following Moodys' downgrade in April of 11 regional issuers and the most recent stress in First Republic. Despite the heightened sensitivity to the regional bank sector, corporate fundamentals were trending down as companies lost pricing power, but from a point of strength. The earnings season has not been as bad as anticipated with aggregate earnings down approximately -1.7% versus consensus of -7%. Despite this point of strength, we believe high labor costs coupled with a Fed focused on driving prices lower will likely pressure profits, impacting margins which should lead to wider spreads.

  • The exempt municipal market experienced an increase in supply during the month of Apri,l yet remained below issuance levels from a year ago through April. As a function of supply, valuations corrected across the curve but was most pronounced in the short end as the 1-year municipal-to-treasury ratio increased from 53.5% to 62% and the 5-year ratio increased over 5%. We believe the market will further need to digest the expectation that the SVB and Signature Bank municipal portfolios will be liquidated during the first few weeks of May which will introduce more supply into the market.  

 

As of 30 April 2023.

 

This marketing communication is provided for informational purposes only and should not be construed as investment advice. Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Loomis, Sayles & Company, L.P. Investment recommendations may be inconsistent with these opinions. There is no assurance that developments will transpire as forecasted and actual results will be different. Information, including that obtained from outside sources, is believed to be correct, but we cannot guarantee its accuracy. This information is subject to change at any time without notice.

This material is not intended to provide tax, legal, insurance, or investment advice. Please seek appropriate professional expertise for your needs.

Indices are unmanaged and do not incur fees. It is not possible to invest directly in an index.

Commodity, interest and derivative trading involves substantial risk of loss.

Any investment that has the possibility for profits also has the possibility of losses, including the loss of principal.

Markets are extremely fluid and change frequently.

Past performance is no guarantee of, and not necessarily indicative of, future results.

MALR030967

Yield
Model TypeDuration Types
Full Intermediate
Conservative 5.56 5.45
Moderate 6.25 6.14
Enhanced 6.5 6.41
Municipal 4.16 3.99
Conservative Hybrid 4.86 4.68
Moderate Hybrid 5.21 5.02
Enhanced Hybrid 5.33 5.2
TAX-ADJUSTED YIELD
Model TypeDuration Types
Full Intermediate
Conservative 3.5 3.43
Moderate 3.94 3.87
Enhanced 4.1 4.04
Municipal 4.16 3.99
Conservative Hybrid 3.96 3.81
Moderate Hybrid 4.25 4.09
Enhanced Hybrid 4.34 4.24
OPTION-ADJUSTED DURATION
Model TypeDuration Types
Full Intermediate
Conservative 6.09 4.53
Moderate 5.73 4.31
Enhanced 5.5 4.32
Municipal 5.59 4.47
Conservative Hybrid 5.84 4.5
Moderate Hybrid 5.66 4.39
Enhanced Hybrid 5.55 4.4
AVERAGE QUALITY
Model TypeDuration Types
Full Intermediate
Conservative 19 19
Moderate 19 19
Enhanced 19 19
Municipal 22 22
Conservative Hybrid 21 21
Moderate Hybrid 20 20
Enhanced Hybrid 20 20
% IN EMERGING MARKETS
Model TypeDuration Types
Full Intermediate
Conservative 0 0
Moderate 0.09 0.09
Enhanced 0.13 0.13
Municipal 0 0
Conservative Hybrid 0 0
Moderate Hybrid 0.05 0.05
Enhanced Hybrid 0.07 0.07
% IN HIGH YIELD
Model TypeDuration Types
Full Intermediate
Conservative 0 0
Moderate 0.06 0.06
Enhanced 0.09 0.09
Municipal 0 0
Conservative Hybrid 0 0
Moderate Hybrid 0.03 0.03
Enhanced Hybrid 0.05 0.05
% In Securitized
Model TypeDuration Types
Full Intermediate
Conservative 0.16 0.16
Moderate 0.12 0.12
Enhanced 0.13 0.13
Municipal 0 0
Conservative Hybrid 0.08 0.08
Moderate Hybrid 0.06 0.06
Enhanced Hybrid 0.07 0.07

Source: Loomis Sayles.

The universe for analysis is typically the broadest opportunity set the respective team invests in, for example, include the Bloomberg US Aggregate Index, and potential indicative yields may assume investments outside of these indices. Conservative portfolios will typically invest in Treasurys, corporates, securitized, and allow up to 5% in emerging markets debt, per client guidelines. Moderate portfolios will typically invest in Treasurys, corporates, securitized, and allow up to 10% in emerging markets debt and 5% in high yield  per client guidelines. Enhanced portfolios will typically invest in Treasurys, corporates, securitized, and allow up to 15% in emerging markets debt and 10% in high yield  per client guidelines.

The sample characteristics and allocations do not represent an actual portfolio managed by Loomis Sayles or any investment recommendation. There is no assurance Loomis Sayles would be able to construct a portfolio with the characteristics or allocations shown. All data is based on current market conditions. These proposed sample characteristics do not take into account the size of the investment or the availability of any securities for purchase. This information is subject to change at any time without notice.

Hybrid models contain a mix of taxable securities and tax-exempt municipal bonds.

This material is not intended to provide tax, legal, insurance, or investment advice. Please seek appropriate professional expertise for your needs.

There is no guarantee that the investment objective will be realized or that the strategy will generate positive or excess return. 

Past performance is no guarantee of future results.

Investment Outlook

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