Beruflich Dokumente
Kultur Dokumente
March 2015
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Quarterly Commentary
Overview
8.00%
6.00%
4.00%
2.00%
0.00%
-2.00%
Advance
-4.00%
Second
-6.00%
Third
-8.00%
Latest
-10.00%
BLS
ADP
350
300
250
200
150
100
50
0
Unemployment Rate
Underemployment Rate
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
2
Quarterly Commentary 3/31/15
Quarterly Commentary
It was against this challenging backdrop that risk
assets were mixed through the first quarter. U.S.
equities as measured by the S&P 500 Index fell 1.58%
during the month but are still positive for the year.
The Barclays U.S. Aggregate Bond Index was up 0.46%
during March and is up 1.6% year-to-date (YTD).
3
Quarterly Commentary 3/31/15
Quarterly Commentary
Emerging Markets Fixed Income
In Emerging Markets Fixed Income (EMFI), the three
sectors of the market the external sovereign,
corporate debt and local currency bonds, represented
by the JP Morgan Emerging Markets Bond Index
Global Diversified (EMBI), the JP Morgan Corporate
Emerging Markets Bond Index Broad Diversified
(CEMBI) and the JP Morgan Government Bond Index
Emerging Markets Broad Diversified (GBI-EM),
respectively posted mixed returns for March and
the first quarter.
4.0%
3.0%
2.0%
1.0%
0.0%
-1.0%
-2.0%
-3.0%
-4.0%
-5.0%
-6.0%
Source: JP Morgan
Quarterly Commentary
reading, the first month of expansion in 2015. Still,
HSBCs private PMI Index, which generally reflects
smaller-to-medium-size firms, showed contraction in
manufacturing for March. The Chinese government
has also taken steps toward liberalization of interest
rates and foreign investor access to local markets,
and the state council approved the creation of
deposit insurance.
5
Quarterly Commentary 3/31/15
Quarterly Commentary
Agency Mortgage-Backed Securities
For the month of March 2015, the Barclays U.S. MBS
Index returned .37% while the Barclays U.S.
Government Index returned close to .61%. The yield
curve slightly flattened with intermediate-term rates
declining the most. U.S. 10-year yields declined by
about 7 bps while 2-year yields declined by about 6
bps. The Barclays U.S. MBS Indexs duration
shortened from 3.73 to 3.54 while the Barclays U.S.
Government Index ended the month with a duration
closer to 5.51. Total applications for refinancing and
overall refinancing activity (based on Mortgage
Bankers Association (MBA) Refinancing and
Applications for Refinancing Indices) ticked upwards
month-over-month
(MoM),
while
aggregate
prepayment speeds also increased.
3/31/2015
3.54
5.00
4.00
3.00
2.00
1.00
0.00
Source: Bloomberg
Jul
12.2%
12.2%
15.1%
Aug
11.4%
11.6%
14.6%
Oct
11.3%
11.7%
14.8%
Nov
10.8%
11.3%
15.3%
Dec
12.6%
12.7%
16.5%
Jan
11.0%
11.3%
13.8%
Feb
14.3%
14.8%
20.4%
Mar
17.6%
18.2%
24.5%
Change
$0.17
-0.19
6
Quarterly Commentary 3/31/15
Quarterly Commentary
enacted at the end of January. The large decline in 30year mortgage rates (based on Freddie Mac 30-year
Survey Commitment Rates) of approximately 20 bps
for the month of January resulted in a spike in
refinancing activity for the first half of the quarter.
Similarly to the previous quarter, much of the
prepayment activity focused around the lower, more
recent production coupons such as 3.5s to 4.5s. This
doesnt come as a surprise as the newer pools have
had less burnout with more of the underlying
borrows becoming more incentivized to refinance
given the local lows in mortgage rates at the
beginning of the year.
3,000.00
2,000.00
1,000.00
0.00
Source: Bloomberg
220.00
3/27/2015
188.9
200.00
180.00
160.00
140.00
120.00
Source: Bloomberg
7
Quarterly Commentary 3/31/15
Quarterly Commentary
Non-Agency Mortgage-Backed Securities
Non-Agency MBS market started out 2015 slow but
trading volume has progressed steadily coming into
the end of the first quarter, with a pick-up in trading
activity during March. Hedge funds were the biggest
sellers with buying activity being concentrated within
insurance companies and money managers. Hedge
fund redemptions, portfolio re-positioning and
Government Sponsored Enterprise (GSE) liquidation
lists all contributed to the selling volume for the
quarter with the majority of buying activity being
concentrated within insurance companies and money
managers. Subprime collateral was the largest traded
sector by volume in March. During the month,
subprime accounted for approximately $5.7 billion of
traded current face with prime and Alt-A accounting
for $1.2 and $2.1 billion respectively. Loss-adjusted
yields have remained consistent throughout the first
quarter as supply for non-Agency MBS have been met
with equivalent demand for the product. Prime
collateral traded at loss-adjusted yields of
approximately 3.75% to 4%, Alt-A from 4% to 4.25%
and subprime collateral in the 4% to 6% range
depending on weighted average life profile. Lossadjusted yields remained consistent with Prime bonds
trading in the 3.75% to 4% range, Alt-A bonds in the
4% to 4.25% range and subprime in the 4.5% to 6%
range depending on weighted average life (WAL)
profile.
ABX Prices
90
80
3/31/2015
80.29
70
60
3/31/2015
75.25
50
40
30
8
Source: Markit via Morgan Stanley
Quarterly Commentary
Investment Grade Credit
Investment grade corporate bonds as measured by
the Barclays U.S. Credit Index returned 2.16% during
the first quarter as performance was mainly driven by
a decline in long-term interest rates. Against this
backdrop, the Barclays U.S. Credit Index ended the
month 5 bps wider generating a monthly total return
of 0.35%. For the first quarter, spreads were
unchanged generating a 3-month total return of
2.16% and outperforming duration-matched UST by
17 bps.
4.0%
3.0%
2.0%
1.0%
0.0%
-1.0%
-2.0%
-3.0%
160
140
120
100
80
60
40
20
0
9
Quarterly Commentary 3/31/15
Quarterly Commentary
High Yield
The High Yield market was bifurcated during March as
consumer-driven segments outperformed the more
volatile commodity-linked sectors. The high yield
market as measured by the Citi High-Yield Cash-Pay
Capped Index fell 0.63% during March, ending the
quarter up 2.34%. Performance was led by Food
Processors/Beverage/Bottling industry which led all
sectors posting a gain of 2.19% and 5.33%, respectively.
The bottom performers for the month included
Secondary Oil & Gas Producers and Metals/Mining. In
general, investors preferred higher-quality paper
during March and the first quarter as high quality
credits outperformed their lower rated counterparts.
After the pullback in March, the Indexs yield-to-worst
was at 6.29% on March 31, tightening 38 bps for the
quarter. The spread-to-worst tightened 19 bps to 503
bps for the first quarter.
Top-Performing Industries MTD* as of 3/31/2015
Food Processors/Beverage/Bottling
Home Builders
Retail - Food and Drug
Building Products
2.19%
0.93%
0.62%
0.60%
5.33%
4.67%
4.09%
4.02%
-3.52%
-3.46%
-1.54%
-1.29%
-1.19%
-0.03%
1.42%
1.45%
10
Quarterly Commentary 3/31/15
Quarterly Commentary
Bank Loans
Bank loans continued their strong start to the year as
the S&P/LSTA Leveraged Loan Index posted a 0.37%
gain for the month of March. These gains come on
the heels of a strong February which showed the
largest monthly total return since January 2012. For
the first quarter of 2015, the Index gained 2.13%.
Strength in the loan market can partially be attributed
to a strong technical environment as inflows from
CLO formation and retail funds exceeded net new
supply by $18.1 billion. This figure marked the biggest
technical surplus on record as the market remains
supply constrained. Institutional loan volume totaled
$23.1 billion during March bringing year-to-date
issuance to $56.4 billion. This figure remains well
below the $128.5 billion seen during the first quarter
of 2014. The decline in volume can partially be
attributed to a decline in refinancing activity which
made up for just 30% of loan activity during March
and just under 10% for February.
Top-Performing Industries MTD* as of 3/31/2015
Food Service
Electronics - Electrical
Food and Drug Retailers
Retailers (Not Food and Drug)
0.88%
0.85%
0.82%
0.81%
3.01%
3.01%
2.93%
2.90%
-1.39%
-0.91%
-0.66%
-0.45%
-1.81%
-0.38%
-0.16%
0.01%
11
Quarterly Commentary 3/31/15
Quarterly Commentary
Collateralized Loan Obligations (CLOs)
Collateralized Loan Obligations (CLOs) continued to
pick up steam in the first quarter of 2015 with 54
deals pricing for a total $29.33 billion. March was the
strongest issuance month so far this year with $14.7
billion across 27 deals coming to market and also beat
the highest monthly issuance in 2014 which was set in
June at $13.78 billion. Issuance in the first quarter of
2015 was roughly $6.7 billion ahead of issuance in the
first quarter of 2014 and on par with issuance for the
first quarter of 2013. 2014 issuance was hampered by
the announcement of the Volcker Rule. 2015
experienced similar headwinds in January as the
market tried to create solutions for risk retention.
Issuance ramped up quickly after January as many
managers wanted to issue deals ahead of
implementation of regulation.
Spreads continued to tighten over the first quarter.
Mezzanine tranches experienced the most tightening
with single As and BBBs coming in by roughly 30 bps
over the quarter. AAAs and AAs came in by 10 and 25
bps, respectively. This spread compression happened
mostly in February, with spreads remaining firm in
March.
Roughly 13% of the deals priced this month are
compliant with Euro Risk Retention regulation. Issuing
U.S. deals that are Euro Risk Retention compliant
allows the managers to issue at tighter spreads than
non-Euro compliant deals since these deals are able
to reach more investors. Another positive note of
issuing a U.S. deal that is Euro compliant is it allows
managers to show they have viable options to stay in
the sector after U.S. Risk Retention goes into effect in
December 2016. For the quarter, $3.88 billion of all
the CLOs issued this quarter were compliant with
Euro Risk Retention.
12
Quarterly Commentary 3/31/15
Quarterly Commentary
Commercial Mortgage-Backed Securities
The Barclays U.S. CMBS Index returned 0.63% for
March and 1.77% for the first quarter of 2015,
outperforming the broader aggregate by 16 bps for
both March and the first quarter. CMBS spreads were
mixed for the month of March, as falling UST rates led
to tighter all in yields and mostly tighter spreads;
however, some parts of the capital stack saw
weakening as investors pulled back when returns
were not meeting minimum yield hurdles. For the
month, new issue AAA widened by 1 bps to swaps
+85 bps and BBB- tightened by 3 bps to swaps +345
bps while legacy last cash flow (LCF) bonds tightened
by 4 bps to swaps +86 bps. CMBS spreads were
tighter for the quarter, despite economic turmoil in
Europe throughout January, in addition to widening
UST in February. For the quarter, new issue AAA
tightened by 3 bps to swaps +85 bps and BBBtightened by 13 bps to swaps +345 bps, while legacy
LCF bonds tightened by 2 bps to swaps +86 bps.
2/28/2015
239.28
250.00
100.00
2/28/2015
158.64
50.00
0.00
13
Quarterly Commentary 3/31/15
Quarterly Commentary
Commodities
In the first quarter of 2015 the broad commodities
markets returned -8.22% as measured by the S&P
GSCI (Goldman Sachs Commodity Index) and -5.95%
as measured by the Bloomberg Commodity Index
(BCOM). Commodities continue to be in a bear
market and this was indicated by four of the five
sectors being negative in the first quarter of 2015.
Precious metals was the only sector to achieve a
positive return; though gold ended down 24 bps in
the quarter, silver rallied 613 bps leading the sector
to a 44 bps increase. Crude oil price fluctuations
continued to be a key driver of volatility in the
commodity world, as indices traded down with it in
January, rallied back with it February before giving
way again in March. This is illustrated by the fact that
the BCOM displayed lower volatility than the S&P
GSCI due to a lower percentage exposure to the
energy sector, but still traded down as energy fell.
As mentioned above, the precious metal sector (+44
bps) displayed high dispersion as gold fell 24 bps
while silver increased over 613 bps. Gold is likely to
be sensitive to inflation, the Federal Reserve funds
rate and global contagion fears going forward. If the
U.S. economy performs well in the face of higher
short-term treasury rates and inflation remains
muted gold prices could fall. On the other hand, if
the business cycle turns south or global fears
flashpoint then gold could increase.
The industrial metals lost 5.09% as weak demand
from China and depreciating (relative to the USD)
producer currencies has weighed on prices. Nickel
was the weakest performer, losing 18.54% in the first
quarter. The bellwether copper was down 3.74%
while inventories have increased indicating a supply
surplus in the market. Other key industrial metals fell
as well with aluminum (-4.04%), zinc (-4.93%) and
lead (-2.34%) all ending down.
Quarterly Commentary
U.S. Government Securities
The UST market was unsettled in March, as a sharp sell
-off began the month in the wake of another stronger
than expected employment report. February job
creation a 295k increase in non-farm payrolls was
well above the consensus forecast of 235k. The 10year UST yield closed at 2.24% on March 6, the highest
since December 2014. A rally began on the next
trading day as the ECB launched its bond buying
program in Europe and low and falling European
sovereign yields and a strengthening dollar gave
support to Treasuries. The rally accelerated through
March 18, the day of the FOMC rate decision. As
expected the FOMC removed patient from its
statement, opening the possibility of a June rate hike.
Unexpected, though, was the decisive downward
revision to FOMC members forecast of growth and
inflation, as well as the dots indicating the members
expectations of the pace of policy tightening. The
downgraded economic outlook prompted an 11 bps
rally by the 10-year Treasury. UST moved sideways for
the remainder of the month amid generally weaker
than expected economic data.
Treasury yields were lower at the conclusion of the
months gyrations. Yields on intermediate UST fell the
most, as is typical when economic forecasts are
revised lower. The 5-year UST yield fell 13 bps. The 2year and 10-year yields both fell 7 bps. The Barclays
U.S. Government Index returned 0.61% in March.
Yield Curve
3 month
6 month
1 year
2 year
3 year
5 year
10 year
30 year
Source: Bl oomberg
2/28/2015
0.01%
0.07%
0.19%
0.62%
1.00%
1.50%
1.99%
2.59%
3/31/2015
0.02%
0.14%
0.23%
0.56%
0.88%
1.37%
1.92%
2.54%
Change
1.00%
0.07%
0.04%
-0.06%
-0.12%
-0.13%
-0.07%
-0.05%
15
Quarterly Commentary 3/31/15
Quarterly Commentary
U.S. Equities
With an absence of meaningful corporate earnings
news, the direction of the USD took center stage in the
equity markets in March. Earlier in the quarter, in
January the three factors (all non-equity) which
dominated the equity market since mid-2014
continued to hold majority sway: falling oil prices,
falling Treasury yields, and the strengthening dollar.
Both oil and the USD had been essentially onedirectional trades since July, and January saw yields on
the 10-year UST fall to levels not seen since the 2013
Taper Tantrum. Mid-March, the USD Index briefly
traded above $100, a level last seen in 2003.
16
Quarterly Commentary 3/31/15
Quarterly Commentary
Global Equities
Global equities as measured by the MSCI All Country
World Index (ACWI) declined 1.78% in March but
ended the first quarter up 1.83%. U.S. equities were
generally lower during the month with the S&P 500
Index and Dow Jones down 1.74% and 1.97%,
respectively. The Nasdaq and Russell 2000 Index were
mixed during the month of March, with the former
down 1.26% and the latter up 1.57%. Despite the weak
March performance, U.S. equities posted mixed
returns for the quarter with the S&P 500 up 0.44%,
Dow Jones down 0.26%, Nasdaq up 3.48%, and
Russell 2000 up 3.99%. The macro data out of the U.S.
was mixed with better than expected jobs data;
however, retail sales and manufacturing data came in
weaker than expected. The FOMC hinted that it could
begin hiking interest rates as early as June of this year,
data permitting.
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Quarterly Commentary 3/31/15