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

For investors looking for low duration, relative price stability, and the ability to benefit from rising short-term rates, corporate floating-rate notes may offer all of these features in an investment-grade asset class.

 

In Brief

  • U.S. ultra-short bonds have been relatively stable during this recent period of bond market volatility.
  • U.S. investment-grade corporate floating-rate notes (FRNs)—one component of ultra-short strategies—can provide a source of attractive income, with low interest-rate sensitivity.
  • FRNs may provide an investment-grade alternative to bank loans for those looking to benefit from a rising London interbank offered rate (LIBOR).

 

A Volatile Period
Last fall, we examined the opportunities in ultra-short bond strategies, which generally are defined as high-quality fixed-income portfolios with an average duration of less than one year. Such strategies have seen increased investor demand over the past year, especially in light of money-market reforms that took place in October 2016.

What has happened since then? Shortly after the adoption of money-market reform, with the election of President Donald Trump, the bond market suffered a significant sell-off. According to Bloomberg, the yield on the 10-year U.S. Treasury bond jumped, to 2.60%, by mid-December, a move of more than 100 basis points (bps) from its level in late September, and 125 bps off the low point in yields reached in early July. Short-maturity yields climbed as well, with the yield on the two-year Treasury bond increasing by 60 bps in the second half of 2016, according to Bloomberg. This led to losses in many segments of fixed income (as outlined in the bottom row of Table 1), with 10-year Treasuries (as measured by the Citigroup 10-Year Treasury Bond Index) declining by 7.5% and the Bloomberg Barclays U.S. Aggregate Bond Index suffering a 2.5% loss. Even short-maturity Treasuries (as represented by the Bloomberg Barclays 1-3 Year Treasury Index) posted a modest loss of 0.6% over this six-month period.

 

Table 1: Ultra-Short Strategies Generated Positive Returns During the Recent Rise in Interest Rates
Performance during periods when U.S. Treasury yields increased 100 bps or more

Source: Morningstar. Ten-year Treasury represented by the Citigroup 10-Year Treasury 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 or expenses, and are not available for direct investment.

 

During this period of rising rates, credit-sensitive sectors of the market (including high-yield bonds, floating-rate loans, and short-term investment-grade corporate bonds) all generated positive returns. But among investment-grade assets, lower-duration bonds exhibited the most stability. A broad measure of ultra-short bond strategies (as represented by the Morningstar Ultra Short Bond Category Average) generated positive returns during this volatile move to higher interest rates.

Investment-Grade Floating-Rate Notes
Within the ultra-short bond universe, one asset class that performed relatively well during periods of rising U.S. Treasury yields was investment-grade corporate floating-rate notes (FRNs). These are bonds issued by investment-grade companies with floating-rate coupons, typically based on a spread over a short-term benchmark rate, such as three-month LIBOR. Unlike a traditional fixed-rate bond, where the coupon is constant over the life of the bond, the coupons on FRNs will reset, generally every three-month period, and adjust up and down with moves in LIBOR. As a result of this structure, floating-rate notes have lower duration and less interest-rate sensitivity than longer-duration fixed-rate bonds. This also leads to lower volatility than longer-duration assets, and greater price stability during periods of rising rates. This is illustrated in Table 1, which shows that FRNs have generated positive returns in each of the past five periods of rising rates (periods when the 10-year Treasury yield rose by more than 100 bps).

In addition to greater price stability, floating-rate notes also can benefit from rising rates, as their income stream will increase with moves in short-term rates. Chart 1 illustrates how this has transpired over the past 16 months. There have been many articles focusing on the moves in three-month LIBOR, recently breaching 1.0%, versus 0.3% in late 2015. As LIBOR has moved higher, the average coupon in the Bloomberg Barclays Corporate Floating Rate Note Index has moved higher as well.

What about going forward? Future movements in interest rates are notoriously difficult to predict with any accuracy, but the market consensus expects two to three rate hikes of 0.25% each by the FOMC (Federal Open Market Committee, the Fed’s policymaking arm) over the next year or so. The rate on three-month LIBOR generally has moved with the fed funds target rate, so one would expect a similar move in the coupon rate of floating-rate notes.

 

Chart 1: Floating Rate Notes–Coupons Have Adjusted Higher with LIBOR
Data as of January 31, 2017

Sources: Bloomberg. Average coupon as measured by the Bloomberg Barclays U.S. Floating Rate Note 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 or expenses, and are not available for direct investment.

 

These attributes make investment-grade floating-rate notes an attractive component of an ultra-short bond strategy. The additional credit spread can provide attractive total-return opportunity in excess of short-term Treasury securities, while the floating-rate coupon leads to much lower interest-rate sensitivity and much less volatility when compared to longer-duration assets. In fact, over the past three years, the FRN Index has had less than half the volatility of the Bloomberg Barclays 1-3 Year Treasury Index and only about 12% of the volatility of the Bloomberg Barclays U.S. Aggregate Bond Index.

 

Chart 2: Floating-Rate Notes Historically Have Exhibited Low Volatility
Trailing three years, as of December 31, 2016

Source: Bloomberg. Volatility as measured by standard deviation. 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 or expenses, and are not available for direct investment.

 

Table 2: Floating-Rate Notes Have Low-Interest Rate Sensitivity
Index data as of January 31, 2017

Source: Bloomberg. 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 or expenses, and are not available for direct investment.

 

It should be noted, however, that the floating-rate coupon in itself does not remove all sources of volatility—one must take into account the final maturity of the bond as well. If you have a period of significant credit deterioration and credit-spread widening, that can translate to price volatility on longer-maturity floating notes. In other words, the floating-rate coupon reduces the interest-rate duration, but not the credit-spread duration. In order to ensure greater price stability, one can focus on short-maturity floating-rate notes. For example, the portion of the Bloomberg Barclays U.S. Floating Rate Note [FRN] Index that includes only bonds with final maturities of less than 18 months has had, historically, significantly lower volatility than the broad Bloomberg Barclays FRN Index.

A Point of Clarification
The investment-grade corporate floating-rate notes described above should not be confused with floating-rate bank loans that are commonly found in floating-rate mutual funds. Also known as leveraged loans or senior bank loans, these are loans that are made to below investment-grade companies. Senior bank loans also have floating-rate coupons, typically tied to three-month LIBOR. As a below investment-grade asset class, however, senior loans offer higher income and higher total-return potential, but they do come with a higher degree of credit risk and volatility.

We also see attractive opportunities in bank loans today. Bank loans offer attractive income, with little interest-rate exposure, and have the benefit of floating-rate coupons to benefit from a potential rising-rate environment. They also provide valuable portfolio-diversification benefits, given their negative correlation with investment-grade bonds. While they are subject to credit risk, we remain positive on the outlook for credit conditions, and believe that the worst of the default cycle has passed, especially in context of an improving U.S. economy.

However, bank loans might not be appropriate as part of an ultra-short bond strategy. For investors looking for the benefit of the floating-rate feature—namely, low duration, relative price stability, and the ability to benefit from rising short-term rates—corporate floating-rate notes provide these features in an investment-grade asset class.

Summing Up
Investors have taken a closer look at ultra-short bond strategies as they consider their options for allocating excess cash. Given their resilience during this recent period of bond market volatility, ultra-short strategies have held up as an option to potentially generate higher returns than cash or money market funds, with lower volatility than short- or intermediate-term bonds.

 

MARKET VIEW PDFs


  Market View
  U.S. Market Monitor

RELATED FUND
The Lord Abbett Ultra Short Bond Fund seeks to deliver current income consistent with the preservation of capital by investing in a broad range of investment grade ultra-short fixed income and money market securities with a weighted average duration of less than one year. Learn more.

CONTRIBUTING STRATEGIST

Lord Abbett's Blog

videoOur blog, The Investment Conversation, features timely commentary and analysis from Lord Abbett experts. Join the conversation.

Lord Abbett's Blog

videoOur blog, The Investment Conversation, features timely commentary and analysis from Lord Abbett experts. Join the conversation.

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