2020 Outlook: Securitized Credit

Timely insights from portfolio managers and industry experts on key financial, economic and political issues.

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Eaton Vance disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Eaton Vance are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance strategy. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness.

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      By Matthew Buckley, CFAInvestment Grade Fixed Income Portfolio Manager, Eaton Vance Management

      Boston - We like securitized assets because we are concerned that the market could slow down in the corporate sector. We find that the volatility in the markets is actually an opportunity for us.


      If there are downgrades in corporate ratings, we expect that to create market volatility. We have positioned the portfolios so that we can take advantage, and look to add securities on dips.

      Mortgage-related opportunities

      We continue to see commercial mortgage-backed securities as an attractive asset in 2020. Many of the loans have performed extremely well, and our research team has been able to visit the sites and understand the properties. Low interest rates have also supported commercial real estate prices. Although there's concern about retail assets, we still see many opportunities that don't have significant retail exposure.

      Residential mortgage credit is also an attractive area, with the low rate environment supporting home price appreciation and affordability.

      Yield curve positioning

      In 2020, we're thinking a lot about how we can position the portfolios along the yield curve. There's little opportunity cost to owning cash-like securities at the short end of the curve, so that can potentially be a good place to defensively position ourselves.

      We expect rates at the long end will move lower in 2020, as over $17 trillion worth of debt in 2019 was negatively yielding across the globe. The US looks like a good risk-adjusted return. Tactically, we expect to move more of our investments into long end of the yield curve.

      Bottom line: We like the short duration nature of securitized bonds: They can be less susceptible to the interest rate risks and the interest rate volatility that we've witnessed.