Treasury Yield Curve (percent)
Treasury Yield Curve (percent)
2-yr/10-yr Treasury Spread (bps) 350
% 7.00
300
6.00 250
5.00
200 150
4.00
100
3.00 50
Treasury Curve 'A' Composite
2.00 1.00
0 -50 -100
0.00
1991
1-yr
5-yr
10-yr
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
30-yr
(Source: Bloomberg LP, Raymond James)
(Source: Bloomberg LP, Raymond James) The Treasury yield curve is derived from available U.S. Treasury securities trading in the market and is provided directly by the Federal Reserve.
The difference in yield between the 2-year and 10-year U.S. government securities. This spread measures the steepness of the yield curve. A normal (positive) yield curve occurs when longer-term rates are higher than shorter-term rates. The opposite holds true for an inverted yield curve.
10-year Corporate Spreads (bps)
5-yr Investment Grade Corporate CDS Markit (bps)
500
300
450
250
400 350
200
300
A AA
250
150
200
100
150 100
50
50
0
0 2002
2003
2004
2005
2006
2007
2008
2009
1/08 3/08 5/08 7/08 9/08 11/08 1/09 3/09 5/09 7/09 9/09 11/09 1/10 3/10 5/10 7/10 9/10 11/10 1/11 3/11
2010
(Source: Bloomberg LP, Raymond James)
(Source: Bloomberg LP, Raymond James) Bloomberg’s investment grade ‘A’ and ‘AA’ rated corporate bond spreads to U.S Treasury securities. This measures the extra yield over Treasuries investors demand for holding corporate debt.
Credit Default Swaps (CDS) attempt to measure the risk of default by a particular credit issuer. The Markit CDS index is a blend of 125 investment grade issuers and reflects the perceived risk of default in the overall market.
TED Spread: 3-mo T-bill vs. Eurodollar LIBOR (bps)
LIBOR and 3-mo T-Bill (bps) 120
1.40 1.20
100
LIBOR 1.00
80
3-month T-Bill
0.80
60
0.60 40
0.40 20
0.20 -
-
1/09
1/09 3/09
5/09 7/09
9/09 11/09 1/10 3/10 5/10
7/10 9/10 11/10 1/11
(Source: Bloomberg LP, Raymond James) The London Interbank Offer Rate (LIBOR), is a daily reference rate based on the interest rates bank borrow funds from one another in the London market. LIBOR and the 3month Treasury bill are components of the TED spread.
3/09
5/09
7/09
9/09 11/09
1/10
3/10
5/10
7/10
9/10 11/10
1/11
(Source: Bloomberg LP, Raymond James) The difference between the interest rate on interbank loans, represented by the Eurodollar London Interbank Offer Rate (LIBOR), and short-term U.S. government debt (T-bill). It is considered an indicator of credit risk in the general economy.
Data as of: 3/25/2011
AA Corporate Yields (bps)
A Corporate Yields (bps)
7.00
7.00
6.00
6.00
5.00
5.00
4.00
4.00
3.00
3.00
2.00
1.00
Mar '11
Jan '11
Jul '10
Jan '10
2.00
Mar '11
Jan '11
Jul '10
Jan '10
1.00
0.00
0.00 1-yr
5-yr
10-yr
30-yr
1-yr
5-yr
10-yr
(Source: Bloomberg LP, Raymond James)
(Source: Bloomberg LP, Raymond James)
BBB Corporate Yields (bps) 9.00
8.00 7.00
6.00
The charts on this page are the U.S. dollar denominated, domestic AA, A, and BBB composite curves for investment grade corporate bonds. Each curve attempts to indicate prevailing yields within each specific credit-quality.
5.00 4.00
3.00
Mar '11
Jan '11
Jul '10
Jan '10
2.00 1.00
0.00 1-yr
5-yr
10-yr
30-yr
(Source: Bloomberg LP, Raymond James)
Data as of: 3/25/2011
30-yr
Corporate ‘A’ Sector Spreads to Treasuries (bps) 250
200
Industrials
Banks
Financials
Utilities
150
100
50
0 3-mo
6-mo
1-yr
2-yr
5-yr
10-yr
30-yr
(Source: Bloomberg LP, Raymond James) The amount of extra yield, in basis points, that investors require to own corporate ‘A’ credit-quality bonds over U.S. Treasury securities.
Investment Company Institute (ICI) Flows of Long-term Funds 40,000
3,300
Total Equity (mil)
3,200
Taxable Bond (mil) 3,100
Total Bond (mil)
20,000
3,000
Money Market (bil: right)
2,900
2,800 0 1/10
4/10
5/10
6/10
6/10
7/10
8/10
9/10
9/10
10/10
11/10
11/10
12/10
1/11
1/11
2/11
3/11
2,700
2,600
-20,000
2,500
(Source: ICI, Raymond James) Total estimated inflows to long-term mutual funds. Flow estimates are derived from data collected from over 95% of industry assets.
Total Issuance Corporate Debt 2007
Issuance ($B) 1,400
2008
2009
2010
2011 YTD Issuance ($B) 1,400
1,200
1,200
1,000
1,000
800
800
600
600
400
400
200
200
0
0 Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
(Source: Bloomberg, Raymond James) Total issuance of U.S. dollar denominated public and private (144a) corporate bonds sold globally.
Data as of: 3/25/2011
Nov
Dec
FDIC Bank Failures 10
400
9
350
8
Bank Failures
7
Cumulative
300
6
250
5
200
4
150
3
100
2
50
1 0
0 8/08
9/08
11/08
1/09
3/09
5/09
7/09
9/09
11/09
1/10
3/10
5/10
7/10
9/10
11/10
1/11
(Source: FDIC, Raymond James) Weekly and cumulative number of banks put into receivership by the Federal Deposit Insurance Corporation.
Annual Returns for Key Fixed Income Sectors (2000 – 2009)
Source: Standard & Poor’s, Raymond James Capital Markets Review All investing involves risk and you may incur a profit or a loss. Past performance is not a guarantee of future results. This material is for informational purposes only and should not be used or construed as a recommendation regarding any security. Indices are unmanaged and cannot accommodate direct investments. An individual who purchases an investment product which attempts to mimic the performance of an index will incur expenses such as management fees and transaction costs which reduce returns. Returns are cumulative total return for stated period, including reinvestment of dividends. For more information, see next page.
Data as of: 3/25/2011
Disclosures: Investors should discuss the risks inherent in bonds with their Raymond James Financial Advisor. Past performance is no assurance of future results. Diversification and asset allocation do not ensure a profit or protect against a loss. Investments are subject to market risk, including possible loss of principal. This communication is intended to improve the efficiency with which Financial Advisors obtain information relevant to their client's taxable fixed income holdings. This information should not be construed as a directive from the RJ&A Taxable Fixed Income Department to buy or sell the securities noted above. Prior to transacting in any security, please discuss the suitability, potential returns, and associated risks of the transactions(s) with your client. The information contained herein has been prepared from sources believed reliable but is not guaranteed by Raymond James & Associates, Inc. (RJA) and is not a complete summary or statement of all available data, nor is it to be construed as an offer to buy or sell any securities referred to herein. Trading ideas expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation or needs of individual investors. Investors are urged to obtain and review the relevant documents in their entirety. RJA is providing this communication on the condition that it will not form the primary basis for any investment decision you may make. Furthermore, because these are only trade ideas, investors should assume that RJA will not produce any follow-up. Employees of RJA or its affiliates may, at times, release written or oral commentary, technical analysis or trading strategies that differ from the opinions expressed within. RJA and/or its employees involved in the preparation or the issuance of this communication may have positions in the securities discussed herein. Securities identified herein are subject to availability and changes in price. All prices and/or yields are indications for informational purposes only. Additional information is available upon request. A credit rating of a security is not a recommendation to buy, sell or hold securities and may be subject to review, revisions, suspension, reduction or withdrawal at any time by the assigning rating agency. T-Bills: Represented by the Citi 3 Month T-Bill Index an index of 3 month treasury bills. Emerging Markets: Represented by the JP Morgan Emerging Markets Bond Index covers total returns U.S. dollar government bonds of 31 foreign countries. High Yield: Represented by the Barclays Capital U.S. Corporate High Yield Credit covering the USD-denominated, non-investment grade, fixedrate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. Intermediate Treasuries: Represented by the Barclays Capital Treasury Intermediate Index representing public obligations of the US treasury with a maturity between 1 and 10 years (excluding Treasury Bills). Certain securities are specifically not included such as state and local government series bonds (SLGs), as well as U.S. Treasury TIPS. In addition STRIPS are excluded as this would result in double counting. Investment Grade Corporate: Represented by the Barclays Capital Corporate Index covering USD-denominated, investment-grade, fixed-rate, taxable securities sold by industrial, utility and financial issuers. The index includes publicly issued U.S. corporate and foreign debentures and secured notes that meet specified maturity, liquidity, and quality requirements. BCAG: The Barclays Capital Aggregate Bond Index is measured as the U.S. Aggregate Index covering USD-denominated, investment-grade, as rated by Moody’s Investors Service, Standard and Poor’s or Fitch Investor’s Service, fixed-rate, taxable bond market of SEC-registered securities with at least one year left to maturity and an outstanding par value of at least 100 million. Long Treasuries: Represented by the Barclays Capital Long Treasury Index represents all publicly issued U.S. Treasury securities with a maturity over 10 years. Certain securities are specifically not included such as state and local government series bonds (SLGs), as well as U.S. Treasury TIPS. In addition STRIPS are excluded as this would result in double counting. Mortgages: Represented by the Barclays Capital Mortgage Index, tracks the performance of mortgage-backed pass through securities in the US. Municipals: Represented by the Barclays Capital Municipal Bond Index covering investment grade, tax-exempt, and fixed-rate bonds with maturities greater than two years. Short Treasuries: Represented by the Barclays Capital 1-3 year Treasury Index. Certain securities are specifically not included such as state and local government series bonds (SLGs), as well as U.S. Treasury TIPS. In addition STRIPS are excluded as this would result in double counting. Unhedged Foreign: Represented by the Barclays Capital Global Aggregate Ex-US Index tracks an international basket of bonds that contains 65% government, 14% corporate, 13% agency, and 8% mortgage-related bonds. US Tips: Represented by the Barclays Capital Real Tips Index consisting of inflation-protected securities issued by the U.S. Treasury. Index returns do not reflect the deduction of fees, trading costs or other expenses. The Index is referred to for informational purposes only; the composition of each Index is different from the composition of the accounts managed by the investment manager. Investors may not make direct investments into any index. Past performance may not be indicative of future results. There is an inverse relationship between interest rate movements and fixed income prices. Generally, when interest rates rise, fixed income prices fall and when interest rates fall, fixed income prices rise. U.S. Treasury bills are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. Treasury bills are certificates reflecting short-term obligations of the U.S. government. Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. Raymond James Financial Services, Inc., member FINRA/SIPC. Ref. 10-06675 until 10/06/2011 © 2011 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC © 2011 Raymond James Financial Services, Inc., member FINRA/SIPC Raymond James Corporate Headquarters ● 880 Carillon Parkway, St. Petersburg, FL 33716
Data as of: 3/25/2011
2-yr/10-yr Treasury Spread (bps) 350
% 7.00
300
6.00 250
5.00
200 150
4.00
100
3.00 50
Treasury Curve 'A' Composite
2.00 1.00
0 -50 -100
0.00
1991
1-yr
5-yr
10-yr
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
30-yr
(Source: Bloomberg LP, Raymond James)
(Source: Bloomberg LP, Raymond James) The Treasury yield curve is derived from available U.S. Treasury securities trading in the market and is provided directly by the Federal Reserve.
The difference in yield between the 2-year and 10-year U.S. government securities. This spread measures the steepness of the yield curve. A normal (positive) yield curve occurs when longer-term rates are higher than shorter-term rates. The opposite holds true for an inverted yield curve.
10-year Corporate Spreads (bps)
5-yr Investment Grade Corporate CDS Markit (bps)
500
300
450
250
400 350
200
300
A AA
250
150
200
100
150 100
50
50
0
0 2002
2003
2004
2005
2006
2007
2008
2009
1/08 3/08 5/08 7/08 9/08 11/08 1/09 3/09 5/09 7/09 9/09 11/09 1/10 3/10 5/10 7/10 9/10 11/10 1/11 3/11
2010
(Source: Bloomberg LP, Raymond James)
(Source: Bloomberg LP, Raymond James) Bloomberg’s investment grade ‘A’ and ‘AA’ rated corporate bond spreads to U.S Treasury securities. This measures the extra yield over Treasuries investors demand for holding corporate debt.
Credit Default Swaps (CDS) attempt to measure the risk of default by a particular credit issuer. The Markit CDS index is a blend of 125 investment grade issuers and reflects the perceived risk of default in the overall market.
TED Spread: 3-mo T-bill vs. Eurodollar LIBOR (bps)
LIBOR and 3-mo T-Bill (bps) 120
1.40 1.20
100
LIBOR 1.00
80
3-month T-Bill
0.80
60
0.60 40
0.40 20
0.20 -
-
1/09
1/09 3/09
5/09 7/09
9/09 11/09 1/10 3/10 5/10
7/10 9/10 11/10 1/11
(Source: Bloomberg LP, Raymond James) The London Interbank Offer Rate (LIBOR), is a daily reference rate based on the interest rates bank borrow funds from one another in the London market. LIBOR and the 3month Treasury bill are components of the TED spread.
3/09
5/09
7/09
9/09 11/09
1/10
3/10
5/10
7/10
9/10 11/10
1/11
(Source: Bloomberg LP, Raymond James) The difference between the interest rate on interbank loans, represented by the Eurodollar London Interbank Offer Rate (LIBOR), and short-term U.S. government debt (T-bill). It is considered an indicator of credit risk in the general economy.
Data as of: 3/25/2011
AA Corporate Yields (bps)
A Corporate Yields (bps)
7.00
7.00
6.00
6.00
5.00
5.00
4.00
4.00
3.00
3.00
2.00
1.00
Mar '11
Jan '11
Jul '10
Jan '10
2.00
Mar '11
Jan '11
Jul '10
Jan '10
1.00
0.00
0.00 1-yr
5-yr
10-yr
30-yr
1-yr
5-yr
10-yr
(Source: Bloomberg LP, Raymond James)
(Source: Bloomberg LP, Raymond James)
BBB Corporate Yields (bps) 9.00
8.00 7.00
6.00
The charts on this page are the U.S. dollar denominated, domestic AA, A, and BBB composite curves for investment grade corporate bonds. Each curve attempts to indicate prevailing yields within each specific credit-quality.
5.00 4.00
3.00
Mar '11
Jan '11
Jul '10
Jan '10
2.00 1.00
0.00 1-yr
5-yr
10-yr
30-yr
(Source: Bloomberg LP, Raymond James)
Data as of: 3/25/2011
30-yr
Corporate ‘A’ Sector Spreads to Treasuries (bps) 250
200
Industrials
Banks
Financials
Utilities
150
100
50
0 3-mo
6-mo
1-yr
2-yr
5-yr
10-yr
30-yr
(Source: Bloomberg LP, Raymond James) The amount of extra yield, in basis points, that investors require to own corporate ‘A’ credit-quality bonds over U.S. Treasury securities.
Investment Company Institute (ICI) Flows of Long-term Funds 40,000
3,300
Total Equity (mil)
3,200
Taxable Bond (mil) 3,100
Total Bond (mil)
20,000
3,000
Money Market (bil: right)
2,900
2,800 0 1/10
4/10
5/10
6/10
6/10
7/10
8/10
9/10
9/10
10/10
11/10
11/10
12/10
1/11
1/11
2/11
3/11
2,700
2,600
-20,000
2,500
(Source: ICI, Raymond James) Total estimated inflows to long-term mutual funds. Flow estimates are derived from data collected from over 95% of industry assets.
Total Issuance Corporate Debt 2007
Issuance ($B) 1,400
2008
2009
2010
2011 YTD Issuance ($B) 1,400
1,200
1,200
1,000
1,000
800
800
600
600
400
400
200
200
0
0 Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
(Source: Bloomberg, Raymond James) Total issuance of U.S. dollar denominated public and private (144a) corporate bonds sold globally.
Data as of: 3/25/2011
Nov
Dec
FDIC Bank Failures 10
400
9
350
8
Bank Failures
7
Cumulative
300
6
250
5
200
4
150
3
100
2
50
1 0
0 8/08
9/08
11/08
1/09
3/09
5/09
7/09
9/09
11/09
1/10
3/10
5/10
7/10
9/10
11/10
1/11
(Source: FDIC, Raymond James) Weekly and cumulative number of banks put into receivership by the Federal Deposit Insurance Corporation.
Annual Returns for Key Fixed Income Sectors (2000 – 2009)
Source: Standard & Poor’s, Raymond James Capital Markets Review All investing involves risk and you may incur a profit or a loss. Past performance is not a guarantee of future results. This material is for informational purposes only and should not be used or construed as a recommendation regarding any security. Indices are unmanaged and cannot accommodate direct investments. An individual who purchases an investment product which attempts to mimic the performance of an index will incur expenses such as management fees and transaction costs which reduce returns. Returns are cumulative total return for stated period, including reinvestment of dividends. For more information, see next page.
Data as of: 3/25/2011
Disclosures: Investors should discuss the risks inherent in bonds with their Raymond James Financial Advisor. Past performance is no assurance of future results. Diversification and asset allocation do not ensure a profit or protect against a loss. Investments are subject to market risk, including possible loss of principal. This communication is intended to improve the efficiency with which Financial Advisors obtain information relevant to their client's taxable fixed income holdings. This information should not be construed as a directive from the RJ&A Taxable Fixed Income Department to buy or sell the securities noted above. Prior to transacting in any security, please discuss the suitability, potential returns, and associated risks of the transactions(s) with your client. The information contained herein has been prepared from sources believed reliable but is not guaranteed by Raymond James & Associates, Inc. (RJA) and is not a complete summary or statement of all available data, nor is it to be construed as an offer to buy or sell any securities referred to herein. Trading ideas expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation or needs of individual investors. Investors are urged to obtain and review the relevant documents in their entirety. RJA is providing this communication on the condition that it will not form the primary basis for any investment decision you may make. Furthermore, because these are only trade ideas, investors should assume that RJA will not produce any follow-up. Employees of RJA or its affiliates may, at times, release written or oral commentary, technical analysis or trading strategies that differ from the opinions expressed within. RJA and/or its employees involved in the preparation or the issuance of this communication may have positions in the securities discussed herein. Securities identified herein are subject to availability and changes in price. All prices and/or yields are indications for informational purposes only. Additional information is available upon request. A credit rating of a security is not a recommendation to buy, sell or hold securities and may be subject to review, revisions, suspension, reduction or withdrawal at any time by the assigning rating agency. T-Bills: Represented by the Citi 3 Month T-Bill Index an index of 3 month treasury bills. Emerging Markets: Represented by the JP Morgan Emerging Markets Bond Index covers total returns U.S. dollar government bonds of 31 foreign countries. High Yield: Represented by the Barclays Capital U.S. Corporate High Yield Credit covering the USD-denominated, non-investment grade, fixedrate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. Intermediate Treasuries: Represented by the Barclays Capital Treasury Intermediate Index representing public obligations of the US treasury with a maturity between 1 and 10 years (excluding Treasury Bills). Certain securities are specifically not included such as state and local government series bonds (SLGs), as well as U.S. Treasury TIPS. In addition STRIPS are excluded as this would result in double counting. Investment Grade Corporate: Represented by the Barclays Capital Corporate Index covering USD-denominated, investment-grade, fixed-rate, taxable securities sold by industrial, utility and financial issuers. The index includes publicly issued U.S. corporate and foreign debentures and secured notes that meet specified maturity, liquidity, and quality requirements. BCAG: The Barclays Capital Aggregate Bond Index is measured as the U.S. Aggregate Index covering USD-denominated, investment-grade, as rated by Moody’s Investors Service, Standard and Poor’s or Fitch Investor’s Service, fixed-rate, taxable bond market of SEC-registered securities with at least one year left to maturity and an outstanding par value of at least 100 million. Long Treasuries: Represented by the Barclays Capital Long Treasury Index represents all publicly issued U.S. Treasury securities with a maturity over 10 years. Certain securities are specifically not included such as state and local government series bonds (SLGs), as well as U.S. Treasury TIPS. In addition STRIPS are excluded as this would result in double counting. Mortgages: Represented by the Barclays Capital Mortgage Index, tracks the performance of mortgage-backed pass through securities in the US. Municipals: Represented by the Barclays Capital Municipal Bond Index covering investment grade, tax-exempt, and fixed-rate bonds with maturities greater than two years. Short Treasuries: Represented by the Barclays Capital 1-3 year Treasury Index. Certain securities are specifically not included such as state and local government series bonds (SLGs), as well as U.S. Treasury TIPS. In addition STRIPS are excluded as this would result in double counting. Unhedged Foreign: Represented by the Barclays Capital Global Aggregate Ex-US Index tracks an international basket of bonds that contains 65% government, 14% corporate, 13% agency, and 8% mortgage-related bonds. US Tips: Represented by the Barclays Capital Real Tips Index consisting of inflation-protected securities issued by the U.S. Treasury. Index returns do not reflect the deduction of fees, trading costs or other expenses. The Index is referred to for informational purposes only; the composition of each Index is different from the composition of the accounts managed by the investment manager. Investors may not make direct investments into any index. Past performance may not be indicative of future results. There is an inverse relationship between interest rate movements and fixed income prices. Generally, when interest rates rise, fixed income prices fall and when interest rates fall, fixed income prices rise. U.S. Treasury bills are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. Treasury bills are certificates reflecting short-term obligations of the U.S. government. Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. Raymond James Financial Services, Inc., member FINRA/SIPC. Ref. 10-06675 until 10/06/2011 © 2011 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC © 2011 Raymond James Financial Services, Inc., member FINRA/SIPC Raymond James Corporate Headquarters ● 880 Carillon Parkway, St. Petersburg, FL 33716
Data as of: 3/25/2011
