Short Duration Scorecard Second Quarter 2018

Transcription

1 Short Duration Scorecard Second Quarter A quarterly reference guide for performance and characteristics for short duration fixed income.

2 Short Duration Scorecard Second Quarter 2018 Summary Short-term bond yields have risen over 1% in the last year. While rising interest rates put downward pressure on bond prices, higher yields allow assets to compound faster going forward and provide a greater cushion to future returns should interest rates continue to climb. Lower quality bonds beat higher quality for the quarter and trailing year, with 'BBB' rated securities beating 'AAA' by 0.24% and 0.74%, respectively. Boosted by 'A' and 'BBB' rated securities, s were the best performing sector, gaining 0.47% for the quarter. (MBS, CMBS, ABS) bonds returned 0.38% and Agencies and Treasuries returned a more modest 0.23% and 0.22%, respectively. 3Q17 4Q17 1Q18 2Q18 1-Year 1-3 Year Return By Sector (%) 0.24 (0.25) (0.13) (0.19) (0.02) (0.02) (0.38) (MBS,CMBS, ABS) 0.44 (0.06) (0.29) Year Return By Quality (%) AAA 0.27 (0.26) (0.15) AA 0.42 (0.14) (0.20) A 0.56 (0.05) (0.40) BBB (0.33) GREEN indicates the best performing sector for the period and RED indicates the worst. Sources: Bloomberg Barclays, ICE Bank of America Merrill Lynch, Atlanta Capital as of 6/30/18. See end of report for important additional information. The following data labels and corresponding benchmarks are used throughout the Short Duration Market Review. is represented by 1-3 Year Index. is represented by ICE BofA Merrill Lynch 1-3 Year Index. is represented by 1-3 Year Index. is represented by Bloomberg Barclays 1-3 Year Index and includes MBS, CMBS, & ABS). AAA is represented by the AAA-rated component of the Bloomberg Barclays 1-3 Year Aggregate. AA is represented by the AA-rated component of the Bloomberg Barclays 1-3 Year Aggregate. A is represented by the A-rated component of the Bloomberg Barclays 1-3 Year Aggregate. BBB is represented by the BBB-rated component of the Bloomberg Barclays 1-3 Year Aggregate.

3 Table of Contents Atlanta Capital s Short Duration Scorecard provides a quick reference guide to what s driving short duration fixed income returns. A periodic review of performance, valuation and other characteristics can help treasurers, cash managers, consultants, etc. identify potential risks and opportunities within the asset class. The report primarily highlights investment grade sectors. Performance Overview 4 Risk Metrics 7 Trailing Yield & Return 8 Index Characteristics & Performance 10 Broad Market & Sector Characteristics & Performance 12 About Atlanta Capital 16 Disclosures 17 3 Data provided is for informational use only. Past performance is no guarantee of future results. See end of report for important additional information. Index data is not for

4 Yield Curve (0-3 Year) US Yield Curves 0 to 3 Year Maturities Yield to Maturity (%) June March 2018 June Mth 6 Mth 1 Year 2 Year 3 Year Return 3-Month Yield Change Return 12-Month Yield Change Yield as of 6/30/18 Treasuries by Maturity 3-Month 6-Month 1-Year 2-Year 3-Year 0.45% +21 bps 0.50% +19 bps 0.41% +23 bps 0.15% +26 bps 0.01% +24 bps 1.37% +90 bps 1.44% +97 bps 1.13% +108 bps (0.15%) +115 bps (0.73%) +108 bps 1.91% 2.11% 2.31% 2.53% 2.62% The yield curve is a graphical representation of the yield offered by bonds of different maturities. Source: Bloomberg Barclays, Bloomberg. Data as of 6/30/18. 4 Data provided is for informational use only. Past performance is no guarantee of future results. See end of report for important additional information. Index data is not for

5 Trailing Returns (1-3 Year) By Sector (3-Month Return) By Credit Quality (3-Month Return) 0.50% 0.47% 0.50% 0.46% 0.47% 0.40% 0.38% 0.40% 0.36% 0.30% 0.20% 0.29% 0.22% 0.23% Aggregate 0.30% 0.20% 0.23% AAA AA A BBB 12-Mth 0.08% 0.30% 0.68% 0.47% 0.22% 12-Mth 0.09% 0.44% 0.57% 0.83% By Sectors (3-Month Return) By Sectors (3-Month Return) 0.45% 0.40% 0.38% 0.36% 0.38% 0.43% 0.50% 0.45% 0.47% 0.47% 0.48% 0.35% 0.42% 0.30% MBS CMBS ABS 0.40% Financial Industrial Utility 12-Mth 0.47% 0.32% 0.47% 0.57% 12-Mth 0.68% 0.66% 0.69% 0.76% Sources: Bloomberg Barclays, ICE Bank of America Merrill Lynch, Atlanta Capital as of 6/30/18. See end of report for important additional information. The following data labels and corresponding benchmarks are used throughout the Short Duration Scorecard. is represented by 1-3 Year Index. is represented by ICE BofA ML 1-3 Year Index. is represented by 1-3 Year Index. is represented by Bloomberg Barclays 1-3 Year Index and includes MBS, CMBS, & ABS). Aggregate is represented by Bloomberg Barclays 1-3 Year Aggregate Index. AAA is represented by the AAA-rated component of the Bloomberg Barclays 1-3 Year Aggregate. AA is represented by the AA-rated component of the Bloomberg Barclays 1-3 Year Aggregate. A is represented by the A-rated component of the Bloomberg Barclays 1-3 Year Aggregate. BBB is represented by the BBB-rated component of the Bloomberg Barclays 1-3 Year Aggregate. MBS is represented by Bloomberg Barclays 1-3 Year Mortgage-Backed Securities (MBS) Index. CMBS is represented by Bloomberg Barclays 1-3 Year Commercial Mortgage-Backed Securities (CMBS) Index. ABS is represented by Bloomberg Barclays 1-3 Year Asset-Backed Securities (ABS) Index. Financial is represented by 1-3 Year Financial Index. Industrial is represented by 1-3 Year Industrial Index. Utility is represented by 1-3 Year Utility Index. 5 Data provided is for informational use only. Past performance is no guarantee of future results. See end of report for important additional information. Index data is not for

6 Trailing Excess Returns (1-3 Year) Trailing 3-Month Ranked in Order of Excess Return Trailing 12-Month Ranked in Order of Excess Return Industrial 0.27% BBB 0.64% 0.26% Industrial 0.61% Financial 0.25% Utility 0.60% BBB 0.22% 0.60% A 0.21% Financial 0.59% Utility 0.20% A 0.36% MBS 0.17% ABS 0.35% ABS 0.16% 0.35% 0.15% CMBS 0.29% CMBS 0.13% MBS 0.28% AA 0.08% AA 0.15% AAA 0.01% AAA 0.02% Excess return, reported by Bloomberg Barclays and, is total return of the specified index less the total return of the equivalent duration note. Sources: Bloomberg Barclays, ICE Bank of America Merrill Lynch, Atlanta Capital as of 6/30/18. See end of report for important additional information. 6 Data provided is for informational use only. Past performance is no guarantee of future results. See end of report for important additional information. Index data is not for

7 Risk (1-3 Year) By Sector By Credit Quality 30.0% 30.0% 20.0% 20.0% 15Yr Rolling 12-Mth High Low Range 10.0% 0.0% High Low 15Yr Rolling 12-Mth High Low Range 10.0% 0.0% -10.0% -10.0% -20.0% -20.0% AAA AA A BBB Highest Return 9.2% 8.2% 17.4% 9.8% Lowest Return (0.3%) (0.1%) (4.6%) (0.4%) 5-Yr Standard 0.65% 0.56% 0.88% 0.70% Deviation* 10-yr Standard 1.14% 1.30% 3.15% 1.30% Deviation* 15-yr Standard 1.60% 1.59% 2.71% 1.38% Deviation* Highest Return 8.4% 10.4% 17.1% 21.7% Lowest Return (0.3%) (0.2%) (6.8%) (4.4%) 5-Yr Standard 0.42% 0.49% 0.62% 0.88% Deviation* 10-yr Standard 1.05% 1.74% 3.76% 3.58% Deviation* 15-yr Standard 1.42% 1.79% 3.19% 3.03% Deviation* * 5,10 and 15-year standard deviation is reported as annualized standard deviation of quarterly returns for the specified period. Sources: Bloomberg Barclays, ICE Bank of America Merrill Lynch, Atlanta Capital as of 6/30/18. See end of report for important additional information. 7 Data provided is for informational use only. Past performance is no guarantee of future results. See end of report for important additional information. Index data is not for

8 Trailing Yield (1-3 Year) 10% 8% 6% Yield to Worst By Sector 4% 2% 0% High 5.2% 5.5% 9.1% 6.2% Low 0.2% 0.3% 1.0% 1.1% 15-Yr Average (7/03-6/18) 1.7% 1.9% 3.1% 2.9% Current (6/30/18) 2.5% 2.6% 3.2% 3.0% Yield to Worst is a measure which reflects the lowest potential yield earned on a bond without the issuer defaulting. The yield to worst is calculated by making the worst-case scenario assumptions by calculating the returns that would be received if provisions, including prepayment, call or sinking fund, are used by the issuer. Sources: Bloomberg Barclays, ICE Bank of America Merrill Lynch, Atlanta Capital as of 6/30/18. See end of report for important additional information. 8 Data provided is for informational use only. Past performance is no guarantee of future results. See end of report for important additional information. Index data is not for

9 Trailing Annual & YTD Performance (1-3 Year) Return By Sector (%) Ranked in Order of Outperformance YTD (2.68) Sources: Bloomberg Barclays, ICE Bank of America Merrill Lynch, Atlanta Capital as of 6/30/18. See end of report for important additional information. 9 Data provided is for informational use only. Past performance is no guarantee of future results. See end of report for important additional information. Index data is not for

10 Index Overview (Common Ultra Short & Short Duration Indices) Credit 100% 100% 100% 94% 61% 13% 6% 26% 3-Mth Bill 1-Yr Note 1-3 Yr 1-3 Yr Government 1-3 Yr Gov/Corp Yield to Worst (%) Duration (years) Weighted Average Maturity (years) Composite Rating AAA AAA AAA AAA AA1 Effective Convexity Par Weighted Price (US$) Market Coupon (%) Sources: ICE Bank of America Merrill Lynch, Atlanta Capital as of 6/30/18. See end of report for important additional information. 10 Data provided is for informational use only. Past performance is no guarantee of future results. See end of report for important additional information. Index data is not for

11 Index Performance (Common Ultra Short & Short Duration Indices) 3-Mth Bill Index 1-Yr Note Index 1-3 Yr 1-3 Yr Government 1-3 Yr Gov/Corp 3-Mth* YTD* Year Year Year Standard Deviation** * Returns less than one year are not annualized. ** Trailing standard deviation is reported as annualized standard deviation of quarterly returns for the specified period. Sources:, Atlanta Capital as of 6/30/18. See end of report for important additional information. 11 Data provided is for informational use only. Past performance is no guarantee of future results. See end of report for important additional information. Index data is not for

12 Broad Market, & Overview 5% 23% 12% Utilities 4% Financials 43% Mortgage- Backed 29% Covered 6% CMBS 20% 60% Bloomberg Barclays 1-3 Yr Aggregate Index Industrials 53% 1-3Yr Index Asset- Backed 45% Bloomberg Barclays 1-3 Yr Bloomberg Barclays 1-3 Yr Aggregate 1-3 Yr Bloomberg Barclays 1-3 Yr Yield to Worst (%) Duration (years) Weighted Average Maturity (years) NR Composite Rating AA1/AA2 A3 NR Effective Convexity NR Par Weighted Price (US$) NR Market Coupon (%) NR Sources: Bloomberg Barclays, ICE Bank of America Merrill Lynch, Atlanta Capital as of 6/30/18. See end of report for important additional information. NR: Not Reported 12 Data provided is for informational use only. Past performance is no guarantee of future results. See end of report for important additional information. Index data is not for

13 Broad Market, & Performance Aggregate Bloomberg Barclays 1-3 Year Aggregate Index Excess 3-Mth* YTD* 0.08 (0.01) 1-3 Year Index Excess 3-Mth* YTD* Bloomberg Barclays 1-3 Year Index Excess 3-Mth* YTD* (2.14) (0.51) (2.68) (9.73) (1.88) (3.79) (1.05) STDEV** STDEV** * Returns less than one year are not annualized. ** standard deviation is reported as annualized standard deviation of quarterly returns for the specified period. Sources: Bloomberg Barclays,, Atlanta Capital as of 6/30/18. See end of report for important additional information. STDEV** 13 Data provided is for informational use only. Past performance is no guarantee of future results. See end of report for important additional information. Index data is not for

14 Performance Financial 1-3 Year Financial Index Industrial 1-3 Year Industrial Index Utility 1-3 Year Utilities Index Excess 3-Mth* YTD* 0.03 (0.03) Excess 3-Mth* YTD* Excess 3-Mth* YTD* 0.07 (0.02) (0.54) (5.77) (12.56) (2.45) (6.86) (1.15) (0.07) (0.41) (5.04) (0.90) STDEV** STDEV** * Returns less than one year are not annualized. ** standard deviation is reported as annualized standard deviation of quarterly returns for the specified period. Sources:, Atlanta Capital as of 6/30/18. See end of report for important additional information. STDEV** 14 Data provided is for informational use only. Past performance is no guarantee of future results. See end of report for important additional information. Index data is not for

15 Performance Mortgage-Backed Bloomberg Barclays 1-3 Year MBS Index Commercial MBS Bloomberg Barclays 1-3 Year CMBS Index Asset-Backed Bloomberg Barclays 1-3 Year ABS Index Excess 3-Mth* YTD* (0.14) (0.05) Excess 3-Mth* YTD* Excess 3-Mth* YTD* (0.35) (0.57) (0.09) (3.41) (10.43) (1.61) (4.23) (11.03) (2.90) STDEV** STDEV** STDEV** * Returns less than one year are not annualized. ** standard deviation is reported as annualized standard deviation of quarterly returns for the specified period. Sources: Bloomberg Barclays, Atlanta Capital as of 6/30/18. See end of report for important additional information. 15 Data provided is for informational use only. Past performance is no guarantee of future results. See end of report for important additional information. Index data is not for

16 About Atlanta Capital Founded in 1969, Atlanta Capital is an SEC-registered investment advisory firm that specializes in managing high-quality stock and bond portfolios on behalf of institutional and individual investors. Today the firm operates independently as a majority-owned subsidiary of Eaton Vance Corp., a Boston-based investment management company listed on the New York Stock Exchange. Atlanta Capital operates as an investment boutique with three investment teams leveraging a central investment philosophy. Our growth equity, core equity and fixed income franchises offer both institutional and individual investors a broad range of high-quality investment strategies. In equity portfolios, we seek to invest in companies with a demonstrated history of consistent growth and stability in earnings. In fixed income portfolios, we emphasize securities with stable and predictable cash flows, and low credit and event risk. For more information, please visit Atlanta Capital Management Co., LLC 1075 Peachtree Street NE, Suite 2100 Atlanta, Georgia Data provided is for informational use only. Past performance is no guarantee of future results. See end of report for important additional information. Index data is not for

17 Important Additional Information & Disclosure Important Information and Disclosure: This material is presented for informational and illustrative purposes only as of the date hereof. It should not be construed as investment advice, or a recommendation to purchase or sell specific securities or to adopt any particular investment strategy. This material has been prepared on the basis of publicly available information, internally developed data, and other third party sources believed to be reliable. However, no assurances are provided regarding the reliability of such information and Atlanta Capital has not sought to independently verify information taken from public and third party sources. The opinions/analyses expressed herein may change at any time without prior notice based upon financial markets and/or general economic conditions. Reproduction or redistribution of the material in any form without express permission from Atlanta Capital is prohibited. The downside risk of any investment reflects the probability of losses. Investing entails risks and there can be no assurance that an investor will achieve profits or avoid losses. Please consider the investment objectives, risks, and fees of an investment strategy carefully before investing; the strategy may not be suitable for all investors. Performance during certain periods reflects strong financial market performance that is not typical and may not be repeated. Past performance does not predict future results. Sources: Bloomberg Barclays, ICE Bank of America Merrill Lynch, and Atlanta Capital. Indexes: Indexes are unmanaged and do not incur management fees, transaction costs or other expenses associated with managed accounts. It is not possible to directly invest in an index. Performance during certain periods reflects strong financial market performance that is not typical and may not be repeated. Past performance is no guarantee of future results. Bloomberg Barclays and indexes not for redistribution or other uses; provided as is, without warranties and with no liability. Atlanta Capital has prepared this report; Bloomberg Barclays and do not endorse it, or guarantee, review or endorse Atlanta Capital s products. Data Labels and Corresponding Benchmarks: The following data labels and corresponding benchmarks are used throughout the Short Duration Scorecard. is represented by 1-3 Year Index. is represented by 1-3 Year Index. is represented by 1-3 Year Index. is represented by Bloomberg Barclays 1-3 Year Index. Aggregate is represented by Bloomberg Barclays 1-3 Year Aggregate Index. AAA is represented by the AAA-rated component of the Bloomberg Barclays 1-3 Year Aggregate. AA is represented by the AA-rated component of the Bloomberg Barclays 1-3 Year Aggregate. A is represented by the A-rated component of the Bloomberg Barclays 1-3 Year Aggregate. BBB is represented by the BBB-rated component of the Bloomberg Barclays 1-3 Year Aggregate. MBS is represented by Bloomberg Barclays 1-3 Year Mortgage-Backed Securities (MBS) Index. CMBS is represented by Bloomberg Barclays 1-3 Year Commercial Mortgage-Backed Securities (CMBS) Index. ABS is represented by Bloomberg Barclays 1-3 Year Asset-Backed Securities (ABS) Index. Financial is represented by 1-3 Year Financial Index. Industrial is represented by 1-3 Year Industrial Index. Utility is represented by 1-3 Year Utility Index. 17 Data provided is for informational use only. Past performance is no guarantee of future results. See end of report for important additional information. Index data is not for

18 Important Additional Information & Disclosure Index Definitions: ICE Bank of America Merrill Lynch 3-Month Bill Index is comprised of a single issue purchased at the beginning of the month and held for a full month. At the end of the month that issue is sold and rolled into a newly selected issue. The issue selected at each month-end rebalancing is the outstanding Bill that matures closest to, but not beyond, three months from the rebalancing date. To qualify for selection, an issue must have settled on or before the month-end rebalancing date. ICE Bank of America Merrill Lynch 1-Year Note Index is comprised of a single issue purchased at the beginning of the month and held for a full month. At the end of the month that issue is sold and rolled into a newly selected issue. The issue selected at each month-end rebalancing is the outstanding two-year note that matures closest to, but not beyond, one year from the rebalancing date. ICE Bank of America Merrill Lynch 1-3 Year Index includes securities in the Index with a maturity from one up to (but not including) three years. ICE Bank of America Merrill Lynch 1-3 Year Government Index includes securities in the Government Index with a maturity from one up to (but not including) three years. The Index includes Treasuries (public obligations of the U.S. ) and agencies (publicly issued debt of U.S. Government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the U.S. Government). ICE Bank of America Merrill Lynch 1-3 Year Government/ Index includes U.S. debt, U.S. government agency debt, taxable debt issued by U.S. states and territories and their political subdivisions, debt issued by U.S. and non-u.s. corporations, non-u.s. government debt and supranational debt with a maturity from one up to (but not including) three years. ICE Bank of America Merrill Lynch 1-3 Year Index includes U.S. dollar denominated investment grade corporate debt publicly issued in the US domestic market with a maturity from one up to (but not including) three years. ICE Bank of America Merrill Lynch 1-3 Year Financial Index is a subset of the US Index including all securities of Financial issuers with a maturity from one up to (but not including) three years. ICE Bank of America Merrill Lynch 1-3 Year Industrial Index is a subset of the US Index including all securities of Industrial issuers with a maturity from one up to (but not including) three years. ICE Bank of America Merrill Lynch 1-3 Year Utilities Index is a subset of the US Index including all securities of Utility issuers with a maturity from one up to (but not including) three years. Bloomberg Barclays Aggregate Index is a market-value weighted index that represents securities that are U.S. domestic, taxable and dollar-denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities and asset-backed securities. Bonds must have at least one year to final maturity regardless of call features. The index is unmanaged and does not incur management fees, transaction costs or other expenses associated with managed accounts. It is not possible to directly invest in an index. Bloomberg Barclays 1-3 Year Aggregate Index is a subset of Bloomberg Barclays Aggregate Index including all securities with a maturity from one up to (but not including) three years. Bloomberg Barclays AAA-Rated Index consists of the Aaa component of the U.S. Aggregate index. Bloomberg Barclays 1-3 Year AAA-Rated Index is a subset of the Bloomberg Barclays AAA-Rated Index including all securities with a maturity from one up to (but not including) three years. Bloomberg Barclays AA-Rated Index consists of the Aa component of the U.S. Aggregate index. Bloomberg Barclays 1-3 Year AA-Rated Index is a subset of the Bloomberg Barclays AA-Rated Index including all securities with a maturity from one up to (but not including) three years. Bloomberg Barclays A-Rated Index consists of the A component of the U.S. Aggregate index. Bloomberg Barclays 1-3 Year A-Rated Index is a subset of the Bloomberg Barclays A-Rated Index including all securities with a maturity from one up to (but not including) three years. Bloomberg Barclays BBB-Rated Index consists of the BBB component of the U.S. Aggregate index. Bloomberg Barclays 1-3 Year BBB-Rated Index is a subset of the Bloomberg Barclays BBB-Rated Index including all securities with a maturity from one up to (but not including) three years. 18 Data provided is for informational use only. Past performance is no guarantee of future results. See end of report for important additional information. Index data is not for

19 Important Additional Information & Disclosure Index Definitions (continued): Bloomberg Barclays Index is the largest component of the U.S. Aggregate Index and consists of the U.S. MBS Index, the ERISA-Eligible CMBS Index, and the fixed-rate ABS Index. As of April 1, 2007, the U.S. MBS Index will include both fixed-rate agency passthroughs and agency hybrid ARM securities. Bloomberg Barclays 1-3 Year Index is a subset of Bloomberg Barclays Index including all securities with a maturity from one up to (but not including) three years. Bloomberg Barclays Mortgage-Backed Securities (MBS) Index is an unmanaged index composed of all fixed securities mortgage pools by GNMA, FNMA and the FHLMC, including GNMA Graduated Payment Mortgages. Bloomberg Barclays 1-3 Year MBS Index is a subset of Bloomberg Barclays Mortgage-Backed Securities Index including all securities with a maturity from one up to (but not including) three years. Bloomberg Barclays Commercial Mortgage-Backed Securities (CMBS) Index measures the performance of investment-grade commercial mortgage- backed securities, which are classes of securities that represent interests in pools of commercial mortgages. The Index includes investment-grade CMBS that are ERISA eligible with $300 million or more of aggregate outstanding transaction size. Bloomberg Barclays 1-3 Year CMBS Index is a subset of Bloomberg Barclays Commercial Mortgage-Backed Securities Index including all securities with a maturity from one up to (but not including) three years. Bloomberg Barclays Asset-Backed Securities (ABS) Index is the ABS component of the Bloomberg Barclays Aggregate Index. The ABS Index has three subsectors: credit and charge cards, autos, and utility. The index includes pass-through, bullet, and controlled amortization structures. The ABS Index includes only the senior class of each ABS issue and the ERISA-eligible B and C tranche. The manufactured housing sector was removed as of January 1, 2008, and the home equity loan sector was removed as of October 1, Bloomberg Barclays 1-3 Year ABS Index is a subset of Bloomberg Barclays Asset-Backed Securities Index including all securities with a maturity from one up to (but not including) three years. Bloomberg Barclays 1-3 Year Auto ABS Index is a subset of Bloomberg Barclays Auto Asset-Backed Securities Index including all securities with a maturity from one up to (but not including) three years. Bloomberg Barclays 1-3 Year Credit Card ABS Index is a subset of Bloomberg Barclays Credit Card Asset-Backed Securities Index including all securities with a maturity from one up to (but not including) three years. Bloomberg Barclays 1-3 Year Utility ABS Index is a subset of Bloomberg Barclays Utility Asset-Backed Securities Index including all securities with a maturity from one up to (but not including) three years. 19 Data provided is for informational use only. Past performance is no guarantee of future results. See end of report for important additional information. Index data is not for