Bonds: A Multi-Sector Approach to Higher Income and Diversification
A Note about Risk: The value of investments in fixed-income securities will change as interest rates fluctuate and in response to market movements. Generally, when interest rates rise, the prices of debt securities fall, and when interest rates fall, prices generally rise. High-yield securities, sometimes called junk bonds, carry increased risks of price volatility, illiquidity, and the possibility of default in the timely payment of interest and principal. Bonds may also be subject to other types of risk, such as call, credit, liquidity, interest-rate, and general market risks. Longer-term debt securities are usually more sensitive to interest-rate changes; the longer the maturity of a security, the greater the effect a change in interest rates is likely to have on its price. Lower-rated bonds may be subject to greater risk than higher-rated bonds. There is no assurance that the investment process will consistently lead to successful investing. Asset allocation and diversification do not eliminate the risk of experiencing investment losses. Neither diversification nor asset allocation can guarantee a profit or protect against loss in declining markets.
Forecasts and projections are based on current market conditions and are subject to change without notice. Projections should not be considered a guarantee.
High-yield bond spread is the percentage difference in current yields of various classes of high-yield bonds (often junk bonds) compared against investment-grade corporate bonds, Treasury bonds or another benchmark bond measure. Spreads are often expressed as a difference in percentage points or basis points (which equal one-one hundredth of a percentage point).
Yield is the annual interest received from a bond and is typically expressed as a percentage of the bond's market price. A credit spread is the difference in yield between a U.S. Treasury bond and a debt security with the same maturity but of lesser quality.
Standard deviation is a measure of the dispersion of a set of data from its mean; more spread-apart data has a higher deviation. Standard deviation is calculated as the square root of variance. In finance, standard deviation is applied to the annual rate of return of an investment to measure the investment's volatility.
The Bloomberg Barclays U.S. Agency Index is an issuer-specific component of the Bloomberg Barclays U.S. Aggregate Bond Index.
The Bloomberg Barclays U.S. Aggregate Bond Index represents securities that are SEC-registered, 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.
The Bloomberg Barclays U.S. Asset-Backed Securities (ABS) Index is the ABS component of the Bloomberg Barclays U.S. Aggregate Bond Index.
The Bloomberg Barclays U.S. Corporate High Yield Bond Index measures the USD-denominated, high yield, fixed-rate corporate bond market.
The Bloomberg Barclays U.S. Treasury Index measures US dollar-denominated, fixed-rate, nominal debt issued by the U.S. Treasury.
The Bloomberg Barclays U.S. Mortgage-Backed Securities Fixed-Rate Index is a rate-specific subset of the Bloomberg Barclays U.S. Mortgage-Backed Securities Index, which is the U.S. MBS component of the U.S. Aggregate index.
The Bloomberg Barclays U.S. Corporate Bond Index includes all publicly held issued, fixed-rate, nonconvertible investment-grade corporate debt. The index is composed of both U.S. and Brady bonds.
The Bloomberg Barclays U.S. Intermediate Corporate Bond Index is a maturity-specific subset of the Bloomberg Barclays U.S. Corporate Bond Index
The Bloomberg Barclays U.S. Treasury Inflation Protected Securities (TIPS) Index measures the performance of TIPS securities issued by the U.S. Treasury.
The Credit Suisse Leveraged Loan Index is designed to mirror the investable universe of the U.S. dollar-denominated leveraged loan market.
The BofA Merrill Lynch All Convertibles, All Qualities Index contains issues that have a greater than $50 million aggregate market value. The issues are U.S. dollar-denominated, sold into the U.S. market and publicly traded in the United States.
The BofA Merrill Lynch U.S. High Yield Master II Constrained Index is a capitalization-weighted index of all U.S. dollar-denominated below investment-grade corporate debt publicly issued in the U.S. domestic market.
The J.P. Morgan Corporate Emerging Markets Bond Index Broad Diversified (CEMBI BD): The CEMBI is a market capitalization weighted index that tracks total returns of US dollar-denominated debt instruments issued by corporate entities in Emerging Markets countries. The index limits the current face amount allocations of the bonds in the CEMBI Broad by constraining the total face amount outstanding for countries with larger debt stocks. The J.P. Morgan Corporate Emerging Markets Bond Index Investment Grade and J.P. Morgan Corporate Emerging Markets Bond Index High Yield are credit quality-specific subsets of the CEMBI.
The J.P. Morgan Emerging Markets Bond Index Global tracks total returns for traded external debt instruments in the emerging markets, and is an expanded version of the JPMorgan EMBI+.
The S&P 500® Index is widely regarded as the standard for measuring large cap U.S. stock market performance and includes a representative sample of leading companies in leading industries.
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The opinions in Market View are as of the date of publication, are subject to change based on subsequent developments, and may not reflect the views of the firm as a whole. The material is not intended to be relied upon as a forecast, research, or investment advice, is not a recommendation or offer to buy or sell any securities or to adopt any investment strategy, and is not intended to predict or depict the performance of any investment. Readers should not assume that investments in companies, securities, sectors, and/or markets described were or will be profitable. Investing involves risk, including possible loss of principal. This document is prepared based on the information Lord Abbett deems reliable; however, Lord Abbett does not warrant the accuracy and completeness of the information. Investors should consult with a financial advisor prior to making an investment decision.