Bond market volatility increased toward the end of the quarter but remains below the levels witnessed during the first quarter of 2021. The largest increase this quarter occurred following the surprise change in the Federal Reserve (Fed) dot plots, projections that now indicate the potential for two rate hikes in 2023 — up from one previously.
1 Per Bloomberg Finance L.P., as of June 30, 2021
2 “Powell: Take Fed's Dot Plot 'With a Big Grain of Salt'”, Bloomberg June 16, 2021
3 “Fed's Daly says could get to taper threshold late this year”, Bloomberg June 30, 2021
4 “Powell says pickup in job gains likely this fall”, the Hill June 22, 2021
5 “U.S. Jobs Jump by Most in 10 Months as Economy Gains Steam”, Bloomberg July 2, 2021
6 Industrial Production, ISM Manufacturing, Durable Goods New Orders, ISM Services, Retail Sales, Consumer Confidence, PCE Total, PCE Services, PCE Goods, Personal Savings, Housing Prices, Existing Home Sales, New Home Sales, Unemployment, Continued Jobless Claims, and Job Openings (non-farm)
7 “U.S. Consumer Confidence Soars on Upbeat Views about Economy”, Bloomberg June 29, 2021
8 Bloomberg Finance L.P. as of June 30, 2021, based on the yield of the Bloomberg Barclays US Corporate High Yield Index
9 Fed Chair Ben Bernanke signaled that a third round of QE was on the table in his 2012 speech at the symposium, while defending the Fed’s controversial bond purchases. The Fed launched QE3 the next month.
10 S&P Dow Jones, Bloomberg Finance, L.P., Bloomberg Barclays High Yield Corporate Bond Index, Bloomberg Barclays EM USD Aggregate Bond Index, S&P/LSTA Leveraged Loan Index as of June 30, 2021. Based on yield-to-worst.
11 SSGA.com as of July 1, 2021
12 SSGA.com as of July 1, 2021
13 Bloomberg Finance L.P., as of June 30, 2021. Based on the yield of the Bloomberg Barclays US Treasury Index and the Bloomberg Barclays US MBS Index
14 Bloomberg Finance, L.P. as of 06/30/2021.
15 SSGA.com, Bloomberg Finance, L.P., as of July 1, 2021. Based on the 30-day SEC yield of TOTL and the yield-to-worst of the Agg.
16 SSGA.com, as of July 1, 2021
17 Morningstar 04/01/2015-06/30/2015. Peers consist of oldest share class of active ETFs and Mutual Funds in the Intermediate Core-Plus Bond Category.
18 Morningstar 02/24/2015–06/30/2021. Peers consist of oldest share class of active ETFs and Mutual Funds in the Intermediate Core-Plus Bond Category.
19 Morningstar 02/21/2020-06/30/2021. Peers consist of oldest share class of active ETFs and Mutual Funds in the Intermediate Core-Plus Bond Category.
20 Bloomberg Finance, L.P. 06/30/2006-06/31/2021. Based on monthly data. High Yield = Bloomberg Barclays US High Yield Corporate Bond. Spreads are 268 basis points, 2nd percentile and yields are at all-time lows at 3.53%. Convexity at -0.20 for the ICE BoFA US High Yield Bond Index
21 Source: JPM, Blackstone Credit as of May 31, 2021
22 S&P Dow Jones, Bloomberg Finance, L.P., Bloomberg Barclays High Yield Corporate Bond Index and S&P/LSTA Leveraged Loan Index as of 06/30/2021. Based on yield-to-worst.
23 Bloomberg Finance L.P., as of June 30, 2021
24 Bloomberg Finance L.P., as of June 30, 2021. High Yield = Bloomberg Barclays US High Yield Corporate Bond. Loans = S&P/LSTA Leveraged Loan Index, investment-grade Corporates = Bloomberg Barclays US Corporate Index
25 FactSet as of 06/30/2021. Based on the annualized standard deviation of the trailing 60-month period. Senior Loans = S&P/LSTA Leveraged Loan Index and High Yield = Bloomberg Barclays US Corporate High Yield Bond Index.
26 Bloomberg Finance L.P., as of July 6, 2021. Based on the return from the Bloomberg Barclays US Corporate Bond Index
27 Bloomberg Finance L.P., as of July 6, 2021. Based on the return from the Bloomberg Barclays US Corporate Bond Index
28 Bloomberg Finance L.P., as of July 6, 2021. Based on the profile of the Bloomberg Barclays US Corporate Bond Index and data from 1/1/2000 to 7/6/2021
29 Bloomberg Finance L.P., as of July 6, 2021, based on the return from the Bloomberg Barclays US Corporate Bond Index and associated maturity bands
30 Bloomberg Finance L.P., as of July 6, 2021. Based on the Bloomberg Barclays US Corporate Bond Index
31 Bloomberg Finance L.P., as of July 6, 2021. Based on the Bloomberg Barclays Capital US FRN < 5 Years Index
32 Bloomberg Finance L.P., as of July 6, 2021. Based on the Bloomberg Barclays US Corporate 1-3 Yr Index
33 Bloomberg Finance L.P., as of July 6, 2021. Based on the profiles of the Bloomberg Barclays US Corporate Bond Index and Bloomberg Barclays US Intermediate Term Corporate Bond Index
34 Bloomberg Finance L.P., as of July 6, 2021. Based on the profiles of the Bloomberg Barclays US Corporate Bond Index and Bloomberg Barclays US Intermediate Term Corporate Bond Index and data from 1/1/2000 to 7/6/2021
35 Bloomberg Finance L.P., as of July 6, 2021. Based on the profiles of the Bloomberg Barclays US Corporate Bond Index and Bloomberg Barclays US Intermediate Term Corporate Bond Index. The DTS for 1- to 10-year corporates is 2.96 versus 9.79 for broad corporates.
Bloomberg Barclays US Aggregate Bond Index
A benchmark that provides a measure of the performance of the US dollar-denominated investment-grade bond market. The “Agg” includes investment-grade government bonds, investment-grade corporate bonds, mortgage pass-through securities, commercial mortgage-backed securities, and asset-backed securities that are publicly for sale in the US.
A company or bond that is rated “BB” or lower is known as junk-grade or high yield , in which case the probability that the company will repay its issued debt is deemed to be speculative.
A fixed income security, such as a corporate or municipal bond, that has a relatively low risk of default. Bond-rating firms, such as Standard & Poor’s, use different lettered descriptions to identify a bond’s credit quality. In S&P’s system, investment-grade credits include those with “AAA” or “AA” ratings (high credit quality), as well as “A” and “BBB” (medium credit quality). Anything below this “BBB” rating is considered non-investment-grade.
Floating-rate debt issued by corporations and backed by collateral, such as real estate or other assets.
The debt obligations of a national government. Also known as “government securities,” Treasuries are backed by the credit and taxing power of a country, and are thus regarded as having relatively little or no risk of default.
The tendency of a market index or security to jump around in price. Volatility is typically expressed as the annualized standard deviation of returns. In modern portfolio theory, securities with higher volatility are generally seen as riskier due to higher potential losses.
The income produced by an investment, typically calculated as the interest received annually divided by the price of the investment. Yield comes from interest-bearing securities, such as bonds and dividend-paying stocks.
Important Risk Discussion
The views expressed in this material are the views of Matthew Bartolini and Emily Theurer through the period ended June 30, 2021, and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk, including the risk of loss of principal.
Diversification does not ensure a profit or guarantee against loss.
Prior to 02/26/2021, the SPDR Blackstone Senior Loan ETF was known as the SPDR Blackstone / GSO Senior Loan ETF.
This communication is not intended to be an investment recommendation or investment advice and should not be relied upon as such.
The value of the debt securities may increase or decrease as a result of the following: market fluctuations, increases in interest rates, inability of issuers to repay principal and interest or illiquidity in the debt securities markets; the risk of low rates of return due to reinvestment of securities during periods of falling interest rates or repayment by issuers with higher coupon or interest rates; and/or the risk of low income due to falling interest rates. To the extent that interest rates rise, certain underlying obligations may be paid off substantially slower than originally anticipated and the value of those securities may fall sharply. This may result in a reduction in income from debt securities income.
The trademarks and service marks referenced herein are the property of their respective owners. Third-party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
Bonds generally present less short-term risk and volatility than stocks, but contain interest rate risk (as interest rates raise, bond prices usually fall); issuer default risk; issuer credit risk; liquidity risk; and inflation risk. These effects are usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.
Investing in high yield fixed income securities, otherwise known as “junk bonds,” is considered speculative and involves greater risk of loss of principal and interest than investing in investment-grade fixed income securities. These lower-quality debt securities involve greater risk of default or price changes due to potential changes in the credit quality of the issuer.
Actively managed funds do not seek to replicate the performance of a specified index. An actively managed fund may underperform its benchmarks. An investment in the fund is not appropriate for all investors and is not intended to be a complete investment program. Investing in the fund involves risks, including the risk that investors may receive little or no return on the investment or that investors may lose part or even all of the investment.
Investments in Senior Loans are subject to credit risk and general investment risk. Credit risk refers to the possibility that the borrower of a Senior Loan will be unable and/or unwilling to make timely interest payments and/or repay the principal on its obligation. Default in the payment of interest or principal on a Senior Loan will result in a reduction in the value of the Senior Loan and consequently a reduction in the value of the Portfolio’s investments and a potential decrease in the net asset value (NAV) of the Portfolio. Securities with floating or variable interest rates may decline in value if their coupon rates do not keep pace with comparable market interest rates. Narrowly focused investments typically exhibit higher volatility and are subject to greater geographic or asset class risk. The fund is subject to credit risk, which refers to the possibility that the debt issuers will not be able to make principal.
State Street Global Advisors Funds Distributors, LLC is the distributor for some registered products on behalf of the advisor. SSGA Funds Management has retained Blackstone Liquid Credit Strategies LLC and Doubleline Capital LP as the sub-advisor. State Street Global Advisors Funds Distributors, LLC is not affiliated with Blackstone Liquid Credit Strategies LLC and Doubleline Capital LP.
Because of their narrow focus, financial sector funds tend to be more volatile. Preferred Securities are subordinated to bonds and other debt instruments, and will be subject to greater credit risk. The municipal market can be affected by adverse tax, legislative or political changes and the financial condition of the issuers of municipal securities. The fund may contain interest rate risk (as interest rates rise bond prices usually fall); the risk of issuer default; inflation risk; and issuer call risk. The Fund may invest in US dollar-denominated securities of foreign issuers traded in the United States.
Investments in emerging or developing markets may be more volatile and less liquid than investments in developed markets and may involve exposure to economic structures that are generally less diverse and mature and to political systems which have less stability than those of more developed countries.