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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
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After beginning the year with market participants pricing in as many as six expected Fed Funds rate cuts in 2024, enthusiasm has steadily eroded primarily due to stubbornly high economic and inflation readings, and market expectations ebbed to only three cuts in 2024 by the time the first quarter ended. Our base case for the economy remains for a soft landing scenario, and we now frame it through the lens of a soft landing which precedes a new expansion rather than a recession.
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Against this backdrop, the investment grade corporate market generated a positive 1.29% return1 for the month of March which benefited from spreads tightening approximately 7 bps during the month while Treasury yields were essentially flat to modestly lower across the curve. Corporate fundamentals don't currently present any catalysts of alarm in our view and stability in margins and leverage has improved as we have witnessed two consecutive quarters of positive earnings.
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The municipal (muni) market saw a brisk level of activity in Q1, with mutual funds seeing consistent weekly inflows and separately managed accounts demand remaining strong, while on the supply side tax-exempt muni issuance spiked 48% relative to Q123 in a reversal of 2022-2023's tepid levels. The Bloomberg Muni Bond Index was flat in March but slightly negative at -0.39% for the quarter, as muni yields ticked upwards across the curve in Q1, with the 14-15 year portion of the curve performing relatively better than the front end and long end. Munis entered the quarter priced relatively rich to Treasurys by historical standards and finished the quarter on the same footing, in our opinion, save for some minimal relief seen in certain tenors.
As of 31 March 2024.
1 Bloomberg US Corporate Investment Grade Index.
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.
MALR032746
Yield
| Model Type | Duration Types | |
|---|---|---|
| Full | Intermediate | |
| Conservative | 5.11 | 4.93 |
| Moderate | 5.45 | 5.1 |
| Enhanced | 5.69 | 5.54 |
| Municipal | 3.28 | 3.17 |
| Conservative Hybrid | 4.2 | 3.77 |
| Moderate Hybrid | 4.4 | 4.02 |
| Enhanced Hybrid | 4.53 | 4.43 |
TAX-ADJUSTED YIELD
| Model Type | Duration Types | |
|---|---|---|
| Full | Intermediate | |
| Conservative | 3.03 | 2.92 |
| Moderate | 3.23 | 3.02 |
| Enhanced | 3.37 | 3.28 |
| Municipal | 3.28 | 3.17 |
| Conservative Hybrid | 3.34 | 3 |
| Moderate Hybrid | 3.5 | 3.2 |
| Enhanced Hybrid | 3.61 | 3.53 |
OPTION-ADJUSTED DURATION
| Model Type | Duration Types | |
|---|---|---|
| Full | Intermediate | |
| Conservative | 6.65 | 4.23 |
| Moderate | 6.24 | 4.94 |
| Enhanced | 5.9 | 4.07 |
| Municipal | 5.49 | 4.46 |
| Conservative Hybrid | 5.93 | 4.76 |
| Moderate Hybrid | 5.74 | 5.1 |
| Enhanced Hybrid | 5.55 | 4.22 |
AVERAGE QUALITY
| Model Type | Duration Types | |
|---|---|---|
| Full | Intermediate | |
| Conservative | 20 | 20 |
| Moderate | 20 | 19 |
| Enhanced | 20 | 20 |
| Municipal | 22 | 22 |
| Conservative Hybrid | 20 | 22 |
| Moderate Hybrid | 21 | 21 |
| Enhanced Hybrid | 21 | 21 |
% IN EMERGING MARKETS
| Model Type | Duration Types | |
|---|---|---|
| Full | Intermediate | |
| Conservative | 0 | 0 |
| Moderate | 0.08 | 0.03 |
| Enhanced | 0.12 | 0.11 |
| Municipal | 0 | 0 |
| Conservative Hybrid | 0 | 0 |
| Moderate Hybrid | 0.04 | 0.02 |
| Enhanced Hybrid | 0.06 | 0.06 |
% IN HIGH YIELD
| Model Type | Duration Types | |
|---|---|---|
| Full | Intermediate | |
| Conservative | 0 | 0 |
| Moderate | 0.04 | 0.07 |
| Enhanced | 0.08 | 0.1 |
| Municipal | 0 | 0 |
| Conservative Hybrid | 0 | 0 |
| Moderate Hybrid | 0.02 | 0.02 |
| Enhanced Hybrid | 0.04 | 0.04 |
% IN Securitized
| Model Type | Duration Types | |
|---|---|---|
| Full | Intermediate | |
| Conservative | 0.13 | 0.14 |
| Moderate | 0.13 | 0.02 |
| Enhanced | 0.19 | 0.19 |
| Municipal | 0 | 0 |
| Conservative Hybrid | 0.07 | 0.08 |
| Moderate Hybrid | 0.07 | 0.01 |
| Enhanced Hybrid | 0.1 | 0.1 |
*The tax-adjusted yield is calculated using an effective tax rate of 40.8% which includes the 37.0% top federal marginal income tax rate and a 3.8% Net Investment Income Tax to fund Medicare.
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
Deep, proprietary research is the foundation of every Loomis Sayles investment strategy.
Every investment decision we make is informed by our global research professionals who offer comprehensive knowledge and expertise across a range of global asset classes and market sectors. These dedicated experts provide the market and issuer-specific insight essential to supporting our portfolio management teams across a wide range of investment strategies.
Please read our most recent Investment Outlook to find out about what our research professionals are watching now across macro drivers, asset classes and potential risks.
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