EV Forward: 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 - Mid-cycle adjustments by the U.S. Federal Reserve (Fed) have been supportive of consumers and businesses alike, who have benefited from declining financial obligation ratios and rising equity valuations, as well as taking advantage of lower rates to refinance mortgages and extend the terms of outstanding debt.

      Along with stimulating new purchases of housing and durable goods by consumers, rate cuts have helped to sustain home price appreciation (HPA), which also supports the mortgage credit market where we invest.

      Commercial mortgage-backed securities (CMBS) are another attractive asset to us, and lower interest rates have encouraged refinancing, boosted commercial property price appreciation and raised capitalization rates.

      Steeper yield curves have also helped banks in the U.S. maintain capitalization, avoiding the situation in the European Union (EU) where banks have been lending at rates near 0%.

      In our view, active management of idiosyncratic risks in the securitized credit space can offer the best opportunities to look for outperformance.