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Eaton Vance

The Timeless Case for Floating-rate Loans

Jun 10, 2016

Floating-rate loans deserve consideration as a strategic portfolio allocation because they can offer:
■ Attractive yields – The rate on loans was among the highest global fixed-income sectors (as of 30 April 2016).
■ Protection against interest-rate risk – Loans have near-zero duration and rates that move with the underlying benchmark – typically Libor.
■ A structure designed to mitigate credit risk – Senior/secured positioning in the capital structure offers a layer of protection that is unique in the corporate fixed-income market.
■ A forward-looking allocation – Loans historically have outperformed the broad bond market in flat and rising rate environments. We believe loans are likely to be an important source of diversification in the coming years.

The Timeless and Timely Case for High Yield Bonds

Jun 2, 2016

■ High-yield bonds occupy a special capital market niche: They have offered better risk-adjusted returns than equities and lower interest-rate sensitivity than the broad fixedincome market.
■ To date, high-yield bonds have been less vulnerable to the adverse effects of rising rates than other fixed-income sectors and have provided positive total returns in rising rate markets.
■ Adding high-yield bonds to a broad fixed-income allocation has improved portfolio efficiency, based on 10-year hypothetical performance of blended portfolios.
■ Recent problems in the energy sector sparked a broad sell-off of high yield, resulting in value opportunities for investors with the expertise and diligence to select quality issuers.

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