Image alt tag

Error!

X

There was a problem contacting the server. Please try after sometime.

Sorry, we are unable to process your request.

Error!

X

We're sorry, but the Insights and Intelligence Tool is temporarily unavailable

If this problem persists, or if you need immediate assistance, please contact Customer Service at 1-888-522-2388.

Error!

X

We're sorry, but the Literature Center checkout function is temporarily unavailable.

If this problem persists, or if you need immediate assistance, please contact Customer Service at 1-888-522-2388.

Tracked Funds

You have 0 funds on your mutual fund watch list.

Begin by selecting funds to create a personalized watch list.

(as of 12/05/2015)

Pending Orders

You have 0 items in your cart.

Subscribe and order forms, fact sheets, presentations, and other documents that can help advisers grow their business.

A verification Email Has Been Sent

Close

An email verification email has been sent to .
Follow the instructions to complete the email validation process.

I have not received my verification email

Check your SPAM mailbox and make sure that twelcome@lordabbett.com is allowed to send you mail.

I'm still having trouble

If you're still having trouble verifying your email address. feel free to contact us.

1-888-522-2388
clientservices@lordabbett.com


OK

We're sorry. We found no record of the email address you provided.

Close

Register For a LordAbbett.com Account
Using Your Email Address.

  • Registered Financial Advisors gain access to:
  • Our data mining tool, Insight & Intelligence
  • Best in-class practice management content
  • Educational events, videos and podcasts.
  • The Lord Abbett Review - Subscribe now!

Registered but Having Problems?

If you believe you are registered and are having problems verifying your email address, feel free to contact us.

1-888-522-2388 clientservices@lordabbett.com

Terms & Condition

X

These Terms of Use ("Terms of Use") are made between the undersigned user ("you") and Lord, Abbett & Co. ("we" or "us"). They become effective on the date that you electronically execute these Terms of Use ("Effective Date").

A. You are a successful financial consultant that markets securities, including the Lord Abbett Family of Funds;

B. We have developed the Lord Abbett Intelligence System (the "Intelligence System"), a state of the art information resource that we make available to a limited community of broker/dealers through the Internet at a secure Web site (the "LAIS Site"); and

C. We wish to provide access to the Intelligence System to you as an information tool responsive to the demands of your successful business pursuant to these Terms of Use. Accordingly, you and we, intending to be legally bound, hereby agree as follows:]

1. Overview. · Scope. These Terms of Use (which we may amend from time to time) govern your use of the Intelligence System. · Revisions; Changes. We may amend these Terms of Use at any time by posting amended Terms of Use ("Amended Terms of Use") on the LAIS Site. Any Amended Terms of Use will become effective immediately upon posting. Your use of the Intelligence System after any Amended Terms of Use become effective will be deemed to constitute your acceptance of those Amended Terms of Use.We may modify or discontinue the Intelligence System at any time, temporarily or permanently, with or without notice to you. Purpose of the Intelligence System. The Intelligence System is intended to be an information resource that you may use to contribute to your business research. The Intelligence System is for broker/dealer use only; it is not to be used with the public in oral, written or electronic form. The information on the Intelligence System and LAIS Site is for your information only and is neither the tax, legal or investment advice of Lord Abbett or its third-party sources nor their recommendation to purchase or sell any security.

2. Your Privileges. · Personal Use. Your use of the Intelligence System is a nontransferable privilege granted by us to you and that we may deny, suspend or revoke at any time, with or without cause or notice. · Access to and Use of the Intelligence System. The User ID and password (together, an "Access ID") issued by us to you (as subsequently changed by you from time to time) is for your exclusive access to and use of the Intelligence System. You will: (a) be responsible for the security and use of your Access ID, (b) not disclose your Access ID to anyone and (c) not permit anyone to use your Access ID. Any access or use of the Intelligence System through the use of your Access ID will be deemed to be your actions, for which you will be responsible. · Required Technology. You must provide, at your own cost and expense, the equipment and services necessary to access and use the Intelligence System. At any time, we may change the supporting technology and services necessary to use the Intelligence System. · Availability. We make no guarantee that you will be able to access the Intelligence System at any given time or that your access will be uninterrupted, error-free or free from unauthorized security breaches.

3. Rights in Data. Our use of information collected from you will be in accordance with our Privacy Policy posted on the LAIS Site. Our compliance with our Privacy Policy will survive any termination of these Terms of Use or of your use of the Intelligence System.

4. Your Conduct in the Use of the Intelligence System. You may access, search, view and store a personal copy of the information contained on the LAIS Site for your use as a broker/dealer. Any other use by you of the Intelligence System and the information contained on the LAIS Site these Terms of Use is strictly prohibited. Without limiting the preceding sentence, you will not: · Engage in or permit any reproduction, copying, translation, modification, adaptation, creation of derivative works from, distribution, transmission, transfer, republication, compilation or decompilation, reverse engineering, display, removal or deletion of the Intelligence System, any portion thereof, or any data, content or information provided by us or any of our third-party sources in any form, media or technology now existing or hereafter developed, that is not specifically authorized under these Terms of Use.

· Remove, obscure or alter any notice, disclaimer or other disclosure affixed to or contained within the Intelligence System, including any copyright notice, trademark and other proprietary rights notices and any legal notices regarding the data, content or information provided through the Intelligence System.

· Create a hyperlink to, frame or use framing techniques to enclose any information found anywhere on the LAIS Site without our express prior written consent.

· Impersonate any person, or falsely state or otherwise misrepresent his or her affiliation with any person in connection with any use of the Intelligence System.

· Breach or attempt to breach the security of the Intelligence System or any network, servers, data, or computers or other hardware relating to or used in connection with the Intelligence System; nor (b) use or distribute through the Intelligence System software or other tools or devices designed to interfere with or compromise the privacy, security or use of the Intelligence System by others or the operations or assets of any person.

· Violate any applicable law, including, without limitation, any state federal securities laws. 5. Your Representations and Warranties. You hereby represent and warrant to us, for our benefit, as of the time of these Terms of Use and for so long as you continue to use the Intelligence System, that (a) you are, and will continue to be, in compliance with these Terms of Use and any applicable laws and (b) you are authorized to provide to us the information we collect, as described in our Privacy Policy.

6. Disclaimer of Warranties.

· General Disclaimers.

THE INTELLIGENCE SYSTEM, THE LAIS SITE AND ALL DATA, INFORMATION AND CONTENT ON THE LAIS SITE ARE PROVIDED "AS IS" AND “AS AVAILABLE” AND WITHOUT ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND. WITHOUT LIMITING THE PRECEDING SENTENCE, LORD ABBETT, ITS AFFILIATES, AGENTS, THIRD-PARTY SUPPLIERS AND LICENSORS, AND THEIR RESPECTIVE EMPLOYEES, CONTRACTORS, DIRECTORS, OFFICERS AND SHAREHOLDERS (COLLECTIVELY, THE “LORD ABBETT GROUP”) EXPRESSLY DISCLAIM ALL WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING THE WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, AND NONINFRINGEMENT. YOU EXPRESSLY AGREE THAT YOUR USE OF THE LAIS SITE, THE INTELLIGENCE SYSTEM, AND THE DATA, INFORMATION AND CONTENT PRESENTED THERE ARE AT YOUR SOLE RISK AND THAT THE LORD ABBETT GROUP WILL NOT BE RESPONSIBLE FOR ANY (A) ERRORS OR INACCURACIES IN THE DATA, CONTENT AND INFORMATION ON THE LAIS SITE AND THE INTELLIGENCE SYSTEM OR (B) ANY TERMINATION, SUSPENSION, INTERRUPTION OF SERVICES, OR DELAYS IN THE OPERATION OF THE LAIS SITE OR THE INTELLIGENCE SYSTEM.

· Disclaimer Regarding Investment Research.

THE INTELLIGENCE SYSTEM INCORPORATES DATA, CONTENT AND INFORMATION FROM VARIOUS SOURCES THAT WE BELIEVE TO BE ACCURATE AND RELIABLE. HOWEVER, THE LORD ABBETT GROUP MAKES NO CLAIMS, REPRESENTATIONS OR WARRANTIES AS TO THE ACCURACY, TIMELINESS, COMPLETENESS OR TRUTHFULNESS OF SUCH DATA, CONTENT AND INFORMATION. YOU EXPRESSLY AGREE THAT YOU ARE RESPONSIBLE FOR INDEPENDENTLY VERIFYING YOUR INVESTMENT RESEARCH PRIOR TO FORMING YOUR INVESTMENT DECISIONS OR RENDERING INVESTMENT ADVICE. THE LORD ABBETT GROUP WILL NOT BE LIABLE FOR ANY INVESTMENT DECISION MADE BY YOU OR ANY OTHER PERSON BASED UPON THE DATA, CONTENT AND INFORMATION PROVIDED THROUGH THE INTELLIGENCE SYSTEM OR ON THE LAIS SITE.

· Survival.

THIS SECTION 6 SHALL SURVIVE ANY TERMINATION OF THESE TERMS OF USE OR YOUR USE OF THE INTELLIGENCE SYSTEM..

7. Limitations on Liability.

NONE OF THE MEMBERS OF THE LORD ABBETT GROUP WILL BE LIABLE TO YOU OR ANY OTHER PERSON FOR ANY DIRECT, INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE, SPECIAL OR EXEMPLARY DAMAGES (INCLUDING LOSS OF PROFITS, LOSS OF USE, TRANSACTION LOSSES, OPPORTUNITY COSTS, LOSS OF DATA, OR INTERRUPTION OF BUSINESS) RESULTING FROM, ARISING OUT OF OR IN ANY WAY RELATING TO THE INTELLIGENCE SYSTEM, THE LAIS SITE OR YOUR USE THEREOF, EVEN IF THE LORD ABBETT GROUP HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS SECTION 7 WILL SURVIVE ANY TERMINATION OF THESE TERMS OF USE OR YOUR USE OF THE INTELLIGENCE SYSTEM.

8. Miscellaneous Provisions.

· Governing Law. This Agreement will governed by and construed in accordance with the laws of the State of New York, without giving effect to applicable conflicts of law principles.

THE UNIFORM COMPUTER INFORMATION TRANSACTIONS ACT OR ANY VERSION THEREOF, ADOPTED BY ANY STATE, IN ANY FORM ("UCITA") WILL NOT APPLY TO THESE TERMS OF USE. TO THE EXTENT THAT UCITA IS APPLICABLE, THE PARTIES HEREBY AGREE TO OPT OUT OF THE APPLICABILITY OF UCITA PURSUANT TO THE OPT-OUT PROVISION(S) CONTAINED THEREIN.

The Intelligence System is not intended to be used by consumers, nor are the consumer protection laws of any jurisdiction intended to apply to the Intelligence System. You agree to initiate and maintain any action, suit or proceeding relating to these Terms of Use or arising out of the use of the Intelligence System exclusively in the courts, state and federal, located in or having jurisdiction over New York County, New York.

YOU HEREBY CONSENT TO THE PERSONAL JURISDICTION AND VENUE OF THE COURTS, STATE AND FEDERAL, LOCATED IN OR HAVING JURISDICTION OVER NEW YORK COUNTY, NEW YORK. YOU AGREE THAT YOU WILL NOT OBJECT TO A PROCEEDING BROUGHT IN YOUR LOCAL JURISDICTION TO ENFORCE AN ORDER OR JUDGMENT OBTAINED IN NEW YORK.

· Relationship of Parties. The parties to these Terms of Use are independent contractors and nothing in these Terms of Use will be construed as creating an employment relationship, joint venture, partnership, agency or fiduciary relationship between the parties.

· Notice. All notices provided under these Terms of Use will be in writing and will be deemed effective: (a) when delivered personally, (b) when received by electronic delivery, (c) one business day after deposit with a commercial overnight carrier specifying next day delivery, with written verification of receipt, or (d) three business days after having been sent by registered or certified mail, return receipt requested. We will only accept notices from you in English and by conventional mail addressed to: General Counsel Lord, Abbett & Co. 90 Hudson Street Jersey City, N.J. 07302-3973 We may give you notice by conventional mail or electronic mail addressed to the last mail or electronic mail address transmitted by you to us.

· Third-Party Beneficiaries. The members of the Lord Abbett Group are third-party beneficiaries of the rights and benefits provided to us under these Terms of Use. You understand and agree that any right or benefit available to us or any member of the Lord Abbett Group hereunder will also be deemed to accrue to the benefit of, and may be exercised directly by, any member of the Lord Abbett Group to the extent applicable.

· Survival. This Section 8 will survive any termination of these Terms of Use or your use of the Intelligence System. The undersigned hereby signs these Terms of Use. By electronically signing and clicking "Accept" below, these Terms of Use will be legally binding on me. To sign these Terms of Use, confirm your full name and enter your User ID and Password (as your electronic signature) in the fields indicated below and click the “I Accept” button.

Reset Your Password

Financial Professionals*

Your password must be a minimum of characters.

Confirmation Message

Your LordAbbett.com password was successully updated. This page will be refreshed after 3 seconds.

OK

 

Market View

In an up-and-down year for U.S. fixed-income markets, short-term corporate bonds were able to hold up relatively well. Here’s why. 

As we pointed out in a previous Market View, the year 2016 was a bit of a roller-coaster ride for investors in U.S. fixed-income securities. The year started in “risk-off” mode, as concerns in commodity-related sectors of the high-yield bond market led to substantial spread widening across corporate credit.  Continuing the trend seen in late 2015, high-yield bond spreads (as measured by the BofA Merrill Lynch U.S. High Yield Master Index) widened by nearly 200 basis points (bps) in the first six weeks of the year, with the average yield on the index exceeding 10%. After peaking in early February, high-yield spreads reversed course for the rest of the year, and tightened by more than 475 bps from their widest levels.

The move in U.S. Treasury yields was equally choppy. The yield on the 10-year U.S. Treasury note declined by 85 bps in the first half of the year—bottoming out in early July after the United Kingdom’s “Brexit” vote (to leave the European Union)—before rising by more than 120 bps, to end the year at 2.55%. The yield on the two-year U.S. Treasury note followed a similar pattern, resulting in a yield rise of over 20 bps for the full year.

While the year was eventful, one outcome was fairly “normal”: short-maturity bonds generated another calendar year of positive returns in 2016, despite higher yields leading to a negative performance for the 10-year U.S. Treasury note. Here’s a recap of how key short-maturity sectors performed:

  • Short-term Treasuries (as measured by the BofA Merrill Lynch 1-3 Year U.S. Treasury Index) eked out a return of 0.9%, keeping alive a 39-year streak of positive calendar-year returns, dating back to the inception of the short-term Treasury index. (See Chart 1.)
  • Short-term corporate bonds (as measured by the BofA Merrill Lynch 1-3 Year U.S. Corporate Index) more than doubled the return of the one- to three-year Treasury index, with a gain of 2.4%. This marks the thirty-eighth year of positive returns out of 39 calendar years since the short-term corporate index’s inception. (See Chart 1.)
  • Investors were rewarded for moving down in credit quality, to the lower end of investment-grade corporates, (as represented by the BofA Merrill Lynch 1-3 Year BBB Corporate Index, which gained 3.5%) and short-maturity high-yield corporate bonds (as represented by the BofA Merrill Lynch 1-3 year U.S. High Yield Index, which returned 15.1%). 
  • Similar to short corporates, short-maturity commercial mortgage-backed securities (CMBS) outperformed similar-duration Treasuries (as represented by the Bloomberg Barclays 1-3.5 Year Non-Agency CMBS Index, which gained 2.1%).

 

Chart 1. Historically, U.S. Short-Term Debt Has Shown Consistent Positive Annual Returns
Calendar-year returns of indicated U.S. short-term debt categories, 1978–2016

Source: Morningstar.  Note: One- to three-year U.S. Treasuries are represented by the BofA Merrill Lynch 1–3 Year U.S. Treasury Index; one- to three-year U.S. corporates are represented by the BofA Merrill Lynch 1–3 Year Corporate Index. Shaded areas represent periods during which the U.S. Federal Reserve raised interest rates.
Past performance is not a reliable indicator or guarantee of future results. Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment. Due to market volatility, the market may not perform in a similar manner in the future. Other time periods may have been different. The historical data are for illustrative purposes only and do not represent the performance of any portfolio managed by Lord Abbett or any particular investment.

 

This recent experience helps illustrate what we have pointed out in previous Market Views, that despite periods of rising interest rates and volatility in credit spreads, short-term corporate bonds historically have exhibited low levels of volatility and positive returns over almost all calendar year time periods. 

Why would this be the case? First, because of the low duration of true short-maturity bonds, big changes in yields or credit spreads have only a modest impact on prices relative to longer-maturity bonds. Second, income is generally the primary driver of total return for any bond investment. This is especially true in the case of short-maturity bonds, since price movements are generally muted. Even in cases where market volatility leads to temporary price declines in short-maturity bonds, they tend to recover fairly quickly, as investors realize their principal is set to be returned in the near future, in the absence of a true credit event, at maturity. As a result, the starting yield on the investment is usually a good predictor of the expected total return. (A recent article by Tim Paulson, Lord Abbett Investment Strategist, examines in greater detail the key characteristics of short-maturity debt.)

The Longer View on Short Credit
Taking a slightly longer-term view, one can see that, over the past few years, short-term credit has generated positive returns in the face of rising short-term interest rates. While the recent increase in the 10-year U.S. Treasury yield has received much attention, investors in short-term bonds would be more affected by moves in the short end of the yield curve. Looking back over the past five years (see Chart 2), for example, the yield on the two-year U.S. Treasury note started and ended 2012 at a yield of 0.25%. With its recent move up to more than 1.25% at the end of December 2016, the yield on two-year Treasuries has now risen by more than 100 bps off its low point below 0.20%, reached in May 2013.

 

Chart 2. Tracking the Trajectory of Short-Term U.S. Treasury Yields
Yield on two-year U.S. Treasury securities, December 31, 2011–January 6, 2017

Source: Bloomberg (historical yield data).
Past performance is not a reliable indicator or guarantee of future results.  Due to market volatility, the market may not perform in a similar manner in the future. Other time periods may have been different. The historical data are for illustrative purposes only and do not represent the performance of any portfolio managed by Lord Abbett or any particular investment.

 

In the face of rising short-term yields, short-term Treasuries have generated modestly positive returns over the trailing five years. But short-term investment-grade corporate bonds and CMBS have more than doubled the return of short Treasuries over the trailing one-, three-, and five-year periods, as Chart 3 shows. Moving down the credit spectrum, short-maturity corporate debt in the ‘BBB’ rated and high-yield categories have generated even higher returns.  [Although due to market volatility, returns during other time periods may have had different or negative results, there is no guarantee that the markets will perform in a similar manner in the future.]
 

Chart 3. Historically, Short-Maturity Credit Has Provided Attractive Risk-Adjusted Returns
Total return and standard deviation for indicated U.S. asset classes, December 31, 2011–December 31, 2016

Source: Morningstar Direct. Short-term U.S. government bonds (“Short-Term Treasuries”) represented by the BofA Merrill Lynch 1-3 Year U.S. Treasury Index.  Investment-grade, short-term corporate bonds (“Short-Term Corporates”) represented by the BofA Merrill Lynch 1-3 Year U.S. Corporate Index. ’BBB’ rated short corporates (“Short-Term BBB Corporates”) represented by the BofA Merrill Lynch 1-3 Year U.S. Corporate Index. Investment-grade, short-term collateralized mortgage-backed securities (“Short-Term CMBS”) represented by the Bloomberg Barclays U.S. 1-3.5 Year CMBS Investment Grade Index. High-yield bonds with maturities of one to three years (“Short-Term High Yield”) represented by the Bloomberg Barclays U.S. 1-3 Year High Yield Bond Index. “Bloomberg Barclays Aggregate” refers to the Bloomberg Barclays U.S. Aggregate Bond Index.
Past performance is no guarantee of future results. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment. Indexes are unmanaged, do not reflect the deduction of fees and expenses, and are not available for direct investment.

 

But a key benefit of short-maturity credit is its historically lower volatility: Over the past five years, short-term corporate bonds have had less than one-third the volatility of the Bloomberg Barclays U.S. Aggregate Bond Index (Bloomberg Barclays Aggregate), a benchmark for the broader U.S. fixed-income market.  Even moving down to lower quality, the standard deviation of short-term ‘BBB’ rated corporate debt is still a fraction of the Bloomberg Barclays Aggregate. Over this period of rising short-term rates, and volatility in long-term rates and credit spreads, short-duration credit-sensitive sectors have generated attractive return and better risk-adjusted returns than either short-term Treasuries or the broader Bloomberg Barclays Aggregate.

The outperformance of short-term credit should come as no surprise: these sectors have had a long history of generating higher returns than short-term Treasuries. Over rolling five-year periods, short-term corporates, short-term high-yield, and short-term CMBS indexes have outperformed comparable maturity Treasury indexes over 94% of the time.

What’s Next?
As we enter 2017, most market participants expect the U.S. Federal Reserve (Fed) to continue on its path of slowly raising the fed funds target rate. So once again, as we did at the start of 2016, we commonly hear the question, “If the Fed is going to raise rates, should I avoid short-term bonds?” 

As illustrated in Chart 1, a look at the past few decades shows that short-term bonds historically have generated positive returns over any calendar year, even in those years when the Fed is raising rates. More recently, when two-year Treasury yields (which are most closely tied to Fed policy) have already risen by 100 bps, short-term bonds have generated positive returns. And short-term credit-sensitive sectors such as ‘BBB’ rated corporates and CMBS have generated higher returns than Treasuries and more attractive risk-adjusted returns than the longer-duration Bloomberg Barclays Aggregate.

Will short-term yields continue higher this year? While we don’t base our fixed-income strategies on making interest-rate calls, we do have a few thoughts to keep in mind:

  • Higher rates would not be a surprise to the market, as higher future fed funds rates are already priced into current bond yields.
  • Short-term yields have already risen by more than 100 bps over the past three years; despite this move, short-term bonds have generated positive returns over that period.
  • Higher rates in the market today provide a higher starting yield for bond investors today compared with what it was three years ago. 
  • One of the benefits of a true short-maturity bond strategy is that there is a constant stream of cash flow coming due to reinvest at the prevailing higher market yields in the case of a rising rate environment.

Many things are uncertain as we enter 2017, but previous experience has shown that short-term, credit-sensitive areas of fixed income historically have provided a source of attractive income with lower volatility and higher risk-adjusted returns relative to the broad U.S. bond market (as measured by the Bloomberg Barclays Aggregate), and have generated positive returns during periods of rising rates.

 

CONCERNED ABOUT RISING RATES?
The Lord Abbett Short Duration Income Fund seeks to deliver a high level of current income consistent with the preservation of capital. Learn more.

CONTRIBUTING STRATEGIST

Please confirm your literature shipping address

Please review the address information below and make any necessary changes.

All literature orders will be shipped to the address that you enter below. This information can be edited at any time.

Current Literature Shipping Address

* Required field