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Identifying Relative Value Across U.S. Fixed-Income Market Sectors

In our new quarterly publication, the leaders of our fixed-income investment team discuss how we are positioning our Core, Core Plus and Multi Credit (unconstrained) Fixed Income portfolios to capitalize on relative value across sectors.

March 17, 2016


Portfolio Positioning: First Quarter 2016

Over the last several years, the fixed income landscape has been reshaped by unprecedented monetary and fiscal policy, which has artificially depressed yields on government-related fixed income securities and caused the Barclays U.S. Aggregate Index to become heavily concentrated in low-yielding Treasury and agency debt. To uncover value, we have looked beyond the Barclays U.S. Aggregate Index, preferring fixed income spread sectors as opposed to the Treasury, agency, and traditional pass-through mortgage sectors. Currently, we see the most compelling value in asset-backed securities (ABS) and non-agency residential mortgage-backed securities:

  • High-quality collateralized loan obligations (CLOs), a subset of the ABS market, have had historically low default rates, with AAA-rated and AA-rated CLO tranches experiencing no defaults or principal losses between 1994 and 2014. With recent spread widening across the capital structure, high-quality CLOs are increasingly attractive on a relative basis, with yield premiums of 100-200 basis points relative to corporate bonds of the same credit rating.
  • Non-agency RMBS are supported by strong fundamentals, as delinquency rates have declined significantly from crisis highs, owing to the recovery in home prices and historically low rates. The sector is also benefiting from a healthy technical backdrop.

Please read our full report to learn more about Guggenheim’s outlook for each of the following sectors:

  • Investment grade corporates
  • High yield
  • Bank loans
  • Asset-backed securities and CLOs
  • Non-agency residential mortgage-backed securities
  • Commercial mortgage-backed securities
  • Commercial real estate debt
  • Municipals
  • Agency residential mortgage-backed securities
  • Treasury and agency securities
 
 

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VIDEO

First Quarter 2021 Fixed-Income Outlook
 

First Quarter 2021 Fixed-Income Outlook

Portfolio Manager Adam Bloch and Matt Bush, a Director in the Macroeconomic and Investment Research Group, share their outlook for the first quarter 2021.

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Solving the Core Conundrum

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