Floating-Rate Loan Market Monitor - Q3 2021 - Eaton Vance
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Q3 2021 Floating-Rate Loan Market Monitor FLOATING-RATE LOAN GROUP
2 Floating-Rate Loan Market Monitor | Q3 2021
Table of Contents
A leader in floating-rate loan investment management, Eaton Vance
Asset Class Review 3
presents Floating-Rate Loan Market Monitor, an in-depth review of
Market Update 8 the loan market through clear and impactful charts. Providing
timely information across a broad array of topics relating to this
Portfolio Applications 27 distinctive asset class, Floating-Rate Loan Market Monitor serves as
a helpful resource in providing connectivity between changing
About Eaton Vance 33
market events and implications for investors’ loan allocation.
Additional Information 36 Use Floating-Rate Loan Market Monitor to educate on the loan
market, provide updates on loan market conditions and explain the
role of loans within portfolios.
Past performance is not a reliable indicator of future results. Data provided is for informational use only. See end of material for important additional information and disclosures.Asset Class Review
4 Floating-Rate Loan Market Monitor | Q3 2021
Asset class review
Floating-Rate Loan primer
Corporate debt issued by below-investment-grade borrowers
Most issuers are significant in size and scale – and many are familiar household names
Companies undertake loans for recapitalizations, acquisitions and refinancings
Coupon income from floating-rate loans resets regularly to maintain a fixed spread over a
variable base rate, usually LIBOR (and in the future likely to be SOFR)
Loans are often referred to as “senior and secured”: They typically have the highest priority of
claims in an issuer’s capital structure and are secured by specific collateral
Other common monikers: bank loans, leveraged loans, senior loans (all are synonymous)
Past performance is not a reliable indicator of future results. Data provided is for informational use only. It is not possible to invest directly in an Index. See end of material for important additional information and
disclosures.5 Floating-Rate Loan Market Monitor | Q3 2021
Asset class review
Fundamental lending proposition
Floating-rate loans represent a senior layer Weighted Average Company Capital Structure
$4.1B Revenue & $872M EBITDA
of issuer capital structure
$12.2 Billion Enterprise Value
Substantial junior capital cushion provides
low loan-to-value
Secured by collateral including issuer 4.1x
Floating-Rate Loans $3,575
$3,575Million
M
(29% of cap structure)
accounts receivable, inventory, property,
plant, equipment and/or stock
$1,046 M
5.3x
High-Yield Bonds
(9% of cap structure)
$7,569 M
Equity 14.0x
$11,741 Million
(62% of cap structure)
Fixed Charge Coverage: 2.1x
Interest Coverage: 3.9x
Source: Eaton Vance, December 31, 2020. Past performance is not a reliable indicator of future results. Data provided is for informational use only. See end of material for important additional information and
disclosures. The data is an average of all loans currently tracked across the Eaton Vance loan platform as of December 31, 2020. Does not represent any particular issuer or product. EBITDA is defined as earnings before
interest taxes depreciation and amortization. Data is based on the pre-pandemic equity multiple of 14.0x.6 Floating-Rate Loan Market Monitor | Q3 2021
Asset class review
Taxonomy of floating-rate loans
US Investment Grade US Floating-Rate Loans US High Yield
Size of Market $6.2 T $1.3 T $1.5 T
# of Issues 6,902 1,462 2,127
Avg. Credit Quality A3/Baa1 B+ B1
Base Rate US Treasuries LIBOR US Treasuries
Coupon Structure Fixed Floating Fixed
Avg. Duration 8.7 yrs. -- 4.2 yrs.
Avg. Yield to Maturity 2.2% 4.2% 4.7%
Avg. Maturity 12.3 yrs 4.8 yrs 6.7 yrs
Sources: Bloomberg, ICE Data Indices LLC, and LCD, an offering of S&P Global Market Intelligence, September 30, 2021. Past performance is not a reliable indicator of future results. Data provided is for informational
use only. It is not possible to invest directly in an Index. See end of material for important additional information and disclosures. US Investment Grade measured by the Bloomberg US Corporate Index. US Floating-Rate
Loans measured by the S&P/LSTA Leveraged Loan Index. US High Yield measured by the ICE BofA US High Yield Index. Size of market is based on par outstandings.7 Floating-Rate Loan Market Monitor | Q3 2021
Asset class review
Sample loan market issuers
Issuer Industry Maturity Date Spread Corp. Ratings
Akzo Nobel Chemicals Chemicals & Plastics Oct 2025 L+300 B+/B1
Asurion Insurance Dec 2026 L+325 B+/Ba3
Avolon Aerospace Equipment Leasing Jan 2025 L+200 BBB-/Baa2
BMC Software Electronics/Electrical Oct 2025 L+375 B/B2
CenturyLink Telecom Mar 2027 L+225 BBB-/Ba3
Charter Communications Cable & Satellite Television Feb 2027 L+175 BBB-/Ba1
Dell Electronics/Electrical Sep 2025 L+175 BBB-/Baa3
Grifols Drugs Jan 2025 L+200 BB+/Ba2
HUB International Insurance Apr 2025 L+300 B/B2
Pilot Travel Centers Retailers (except food & drug) Aug 2028 L+200 BB+/Ba1
Scientific Games Lodging & Casinos Aug 2024 L+275 B+/Ba3
Univision Radio & Television Mar 2024 L+275 B/B2
Valeant Pharmaceuticals Drugs Jun 2025 L+300 BB-/Ba2
Virgin Media Cable & Satellite Television Jan 2028 L+250 BB-/Ba3
Zayo Group Telecom Mar 2027 L+300 B/B1
Source: LCD, an offering of S&P Global Market Intelligence, September 30, 2021. Past performance is not a reliable indicator of future results. Data provided is for informational and illustrative purposes only. This is an
example only and is not intended to represent the allocation of any fund/account/strategy. This list represents a sample of some of the larger and more liquid loans in the S&P/LSTA Leveraged Loan Index. This sample is not
necessarily representative of the other issuers in this index, which will vary based on factors including size and liquidity. This information is not to be construed as investment advice or a recommendation to buy or sell any
particular security. Investors should consult an investment professional prior to making any investment decisions. It is not possible to invest directly in an index. See end of material for important additional information and
disclosures.Market Update
9 Floating-Rate Loan Market Monitor | Q3 2021
Market update
Floating-rate loan quarterly dashboard
Index Statistics Top 10 Industries
0% 5% 10% 15% 20%
Total Par Outstanding ($B) $1,299.34
Electronics/Electrical 15.7%
Number of Issuers 1,177 Health Care 9.8%
Business Equipment & Services 9.8%
Number of Facilities 1,462 Chemicals & Plastics 4.4%
Insurance 3.8%
Bid Price $98.62
Telecom 3.8%
Nominal Spread L+372 Leisure Goods/Activities/Movies 3.7%
Industrial Equipment 3.7%
Discounted Spread (3 Years) L+413
Cable & Satellite Television 3.6%
Years to Maturity 4.81 yrs. Building & Development 3.4%
Yield to Maturity 4.19% Maturity Breakdown
40%
30%
23.9%
20.7% 20.6%
Loan Type 20% 16.9%
13.2%
First Lien 97.47% 10%
3.6%
0.1% 0.1% 0.9%
Second Lien 2.53%
0%
2021 2022 2023 2024 2025 2026 2027 2028 2029
Source: LCD, an offering of S&P Global Market Intelligence, September 30, 2021. Past performance is not a reliable indicator of future results. All data reflects the S&P/LSTA Leveraged Loan Index. Data provided is for
informational and illustrative purposes only. It is not possible to invest directly in an index. See end of material for important additional information and disclosures. Maturity breakdown excludes defaulted facilities and is
based on par amount outstanding. Spread, yield and maturity data excludes defaults.10 Floating-Rate Loan Market Monitor | Q3 2021
Market update
Floating-rate loan quarterly dashboard
Breakdown by Bid Price Breakdown by Facility Rating
$70-79.99
Less than $70 0.29%
0.43% BBB BB
$80-$89.99 7.24% 22.88%
1.95%
Par and Above
25.85%
Not Rated
1.98%
CCC and
Lower
6.70%
Average Price: Average Rating:
$98.62 B+
B
$90-$99.99 61.20%
71.49%
Source: LCD, an offering of S&P Global Market Intelligence, September 30, 2021. Past performance is not a reliable indicator of future results. All data reflects the S&P/LSTA Leveraged Loan Index. Data provided is for
informational and illustrative purposes only. It is not possible to invest directly in an index. See end of material for important additional information and disclosures. Breakdown by bid price includes performing loans only.11 Floating-Rate Loan Market Monitor | Q3 2021
Market update
Floating-rate loan quarterly dashboard
Price Distribution Price by Credit Tier
Percent of the Index Average Bid Price of Outstanding Loans
70% $100
Below 80 80-90 90-98 98-100 Par and above BB
60% $95
B
$90
50%
$85
40%
$80
CCC
30%
$75
20%
$70
10% $65
0% $60 Feb 2020
Feb 2021
Mar 2020
May 2020
Apr 2020
Oct 2020
Mar 2021
Apr 2021
May 2021
Jul 2020
Jul 2021
Dec 2019
Jan 2020
Jun 2020
Aug 2020
Sep 2020
Nov 2020
Dec 2020
Jan 2021
Jun 2021
Aug 2021
Sep 2021
Dec 2019 Mar 2020 Sep 2021
Source: LCD, an offering of S&P Global Market Intelligence, September 30, 2021. Past performance is not a reliable indicator of future results. Data provided is for informational and illustrative purposes only. It is not
possible to invest directly in an index. See end of material for important additional information and disclosures. Data includes performing loans only in the S&P/LSTA Leveraged Loan Index.12 Floating-Rate Loan Market Monitor | Q3 2021
Market update
Performance: Calendar year index returns
2008
2015
2018
2011
2014
2002
2007
2020
1999
2017
2001
2000
2005 Median: 5.08%
2004
1998
2013
2006
1997
LTM Last 12 Months: 8.40%
2019
2012
2003
2010
2016
2009
-30% -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55%
Return
Source: LCD, an offering of S&P Global Market Intelligence, September 30, 2021. Past performance is not a reliable indicator of future results. Performance measures the S&P/LSTA Leveraged Loan Index. Data provided
is for informational use only. Indexes are unmanaged, do not reflect the deduction of fees and expenses, and are not available for direct investment.13 Floating-Rate Loan Market Monitor | Q3 2021
Market update
Performance: Distribution of quarterly returns
Negative Quarters Positive Quarters
25% 2
20% 1.8
15% 1.6
10% 1.4
Median Return
Q3 2021
1.43%
5% Return 1.2
1.11%
Return
0% 1
-5% 0.8
5 Worst Quarterly Performances 5 Best Quarterly Performances
-10% Q4 2008 -22.94% Q2 2009 20.38% 0.6
Q1 2020 -13.05% Q3 2009 10.53%
-15% 0.4
Q3 2008 -6.99% Q1 2009 9.80%
-20% Q1 2008 -5.74% Q2 2020 9.70% 0.2
Q3 2011 -3.85% Q2 2008 4.94%
-25% 0
Source: LCD, an offering of S&P Global Market Intelligence, September 30, 2021. Past performance is not a reliable indicator of future results. Performance measures all quarterly returns of the S&P/LSTA Leveraged Loan
Index back to its inception in January 1997 and sorts them from lowest to highest. Data provided is for informational use only. Indexes are unmanaged, do not reflect the deduction of fees and expenses, and are not available
for direct investment.14 Floating-Rate Loan Market Monitor | Q3 2021
Market update
Performance: Credit tier returns
Credit Tier Performance
Q3 and Trailing 12 Months
Q3 2021
Trailing 12 Months
25% 22.7%
20%
15%
Return
10% 8.4% 8.3%
7.3%
5.2%
4.0%
5%
2.1%
1.1% 0.7% 0.8% 1.1% 0.6%
0%
Index BBB BB B CCC D
Credit Tier % of Index Avg. Price Avg. Spread (bps)
Index -- $98.6 L+413
BBB 7.2 $99.6 L+210
BB 22.9 $99.4 L+309
B 61.2 $99.3 L+428
CCC 6.2 $92.9 L+827
D 0.4 $56.2 --
Source: LCD, an offering of S&P Global Market Intelligence, September 30, 2021. Past performance is not a reliable indicator of future results. Performance measures the S&P/LSTA Leveraged Loan Index. Data
provided is for informational use only. Indexes are unmanaged, do not reflect the deduction of fees and expenses, and are not available for direct investment. See end of material for important additional information and
disclosures. Credit tier spreads measure discounted spread to three years over LIBOR.15 Floating-Rate Loan Market Monitor | Q3 2021
Market update
Performance: Industry size and returns
Industry Performance and Market Value
Q3 2021
5%
Nonferrous
Metals/Minerals
3.8%
4%
Business Equipment
Cosmetics/Toiletries & Services
2.7% 1.1%
Lodging & Casinos Aerospace &
3% 1.3% Ecological Services & Defense
Industrial Equipment
Equipment 1.0% Automotive Equipment
Oil & Gas 1.1%
1.1% 0.9% Leasing
1.8% Health Care Radio & 0.7%
Conglomerates 1.2% Television Air Transport Cable & Satellite Television
2% 2.7%
Financial Intermediaries 1.1% 1.0% 0.9%
1.1% Food/Drug Retailers
Steel 0.8%
Q3 Return
0.9% Leisure Goods/Activities/Movies
0.2%
1% Publishing
1.8% Utilities
1.6%
Telecom
1.1% Insurance Food
Surface Transport 1.0% Service
Containers & Glass Food
1.1% 0.8% Drugs
0% Products Products
0.8%
Electronics/Electrical Home Furnishings 1.1% Clothing/Textiles 0.9% Beverage &
1.2% 1.1% 1.0% Tobacco
Building & Retailers (except
0.6%
Development food & drug)
Chemicals & Plastics 0.9%
-1% 1.1%
1.1%
-2%
Forest Products
-2.2%
-3%
Source: LCD, an offering of S&P Global Market Intelligence, September 30, 2021. Past performance is not a reliable indicator of future results. Performance measures the S&P/LSTA Leveraged Loan Index. Data
provided is for informational use only. Indexes are unmanaged, do not reflect the deduction of fees and expenses, and are not available for direct investment. See end of material for important additional information and
disclosures. Bubble size reflects the market value of each industry in the S&P/LSTA Leveraged Loan Index.16 Floating-Rate Loan Market Monitor | Q3 2021
Market update
Technical factors: Market size and trading volume
Market Size Trading and Turnover
Par Amount of Outstanding Loan Market US Trading Volume and Annual Loan Turnover Ratio
$900B 100%
$1300 B Volume Turnover Ratio (%)
$1,299
$1200 B $800B $824
$1,193 $1,193
$1100 B $1,147 $772
$700B $743
$720
$1000 B 75%
69%
$900 B $955 $600B $635
$596
$881
$800 B
$500B
$700 B 50%
$600 B $400B
$500 B
$300B
$400 B
25%
$300 B $200B
$200 B
$100B
$100 B
$0 B $0B 0%
2016
2017
2018
2019
2020
1H 2021 Ann.
2020
2016
2017
2018
2019
Sep 2021
Source: LCD, an offering of S&P Global Market Intelligence, LSTA Trade Data Study. Par amount outstanding as of September 30, 2021. Trading and turnover as of June 30, 2021. Past performance is not a reliable
indicator of future results. Data provided is for informational use only. Amount of outstandings measures the S&P/LSTA Leveraged Loan Index. Trading and turnover data is sourced from 20 of the largest buy-side and sell-
side member institutions of the LSTA. The 1H 2021 trading volume and turnover data is annualized. It is not possible to invest directly in an Index.17 Floating-Rate Loan Market Monitor | Q3 2021
Market update
Technical factors: Loan demand and M&A volume
Visible Demand Institutional Loan Volume Backing M&A
Quarterly CLO Creation and Mutual Fund Flows Leveraged Buyout (LBO) and Other M&A
$70 B $100 B
CLOs Loan Funds Total LBO Other M&A
$60 B $90 B
$50 B $80 B
$40 B $70 B
$30 B $60 B
$20 B $50 B
$10 B $40 B
$0 B $30 B
-$10 B $20 B
-$20 B $10 B
-$30 B $0 B
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
1Q21
2Q21
3Q21
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
1Q21
2Q21
3Q21
Source: LCD, an offering of S&P Global Market Intelligence, September 30, 2021. Past performance is not a reliable indicator of future results. Data provided is for informational use only. It is not possible to invest directly
in an Index.18 Floating-Rate Loan Market Monitor | Q3 2021
Market update
Fundamental conditions: Revenue and earnings growth
Year-Over-Year Revenue Growth Year-Over-Year EBITDA Growth
35% 35%
27%
25% 25%
21%
15% 15%
5% 5%
-5% -5%
-15% -15%
-25% -25%
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
1Q18
3Q18
1Q19
3Q19
1Q20
3Q20
1Q21
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
1Q18
3Q18
1Q19
3Q19
1Q20
3Q20
1Q21
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
Source: LCD, an offering of S&P Global Market Intelligence, Q2 2021. Past performance is not a reliable indicator of future results. Data provided is for informational use only. It is not possible to invest directly in an
Index. EBITDA refers to earnings before interest, taxes, depreciation and amortization. The data are based on approximately 150 public issuers included in the S&P/LSTA Leveraged Loan Index. See end of material for
important additional information and disclosures.19 Floating-Rate Loan Market Monitor | Q3 2021
Market update
Fundamental conditions: Leverage and interest coverage
Weighted Average Leverage Interest Coverage
8x Senior Leverage Total Leverage 5x
7x
4x
6x
3x
5x
2x
4x
1x
3x
2x 0x
2014
2018
2010
2011
2012
2013
2015
2016
2017
2018
2019
2020
2021
2010
2011
2012
2013
2014
2015
2016
2017
2019
2020
2021
Source: Eaton Vance, September 30, 2021. Past performance is not a reliable indicator of future results. Data provided is for informational use only. See end of material for important additional information and
disclosures. The data is an average of all loans tracked across the Eaton Vance loan platform. Does not represent any particular issuer or product.20 Floating-Rate Loan Market Monitor | Q3 2021
Market update
Fundamental conditions: Loan upgrades outpacing downgrades
Rolling 3-Month Count of Ratings Upgrades & Downgrades
200
Upgrades
100
0
Downgrades
-100
-200
-300
-400
-500
2009
2008
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Source: LCD, an offering of S&P Global Market Intelligence, September 30, 2021. Past performance is not a reliable indicator of future results. All data reflects the S&P/LSTA Leveraged Loan Index. Data provided is for
informational and illustrative purposes only. It is not possible to invest directly in an index. See end of material for important additional information and disclosures.21 Floating-Rate Loan Market Monitor | Q3 2021
Market update
Fundamental conditions: Default rate and distress ratio
Default Rate Distress Ratio
Last 12 Months By Principal Amount Percent of Performing Loans Trading Below $80
12%
90%
Actual
Default
Rate 80%
10%
70%
8%
60%
50%
6%
Credit Loss
(Assumes 40%
70%
Recoveries)
4% 30%
20%
2%
10%
0.35%
0% 0.11% 0% 0.72%
'00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20
Source: LCD, an offering of S&P Global Market Intelligence, September 30, 2021. Past performance is not a reliable indicator of future results. All data reflects the S&P/LSTA Leveraged Loan Index. Data provided is for
informational use only. It is not possible to invest directly in an Index. See end of material for important additional information and disclosures.22 Floating-Rate Loan Market Monitor | Q3 2021
Market update
Valuations: Composition of average loan Index coupon
12%
Credit Spread 3-Month LIBOR Floor Benefit
10%
All-In Coupon Rate
8%
6%
4%
2%
0%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Credit Spread Corresponding All-In Rate LIBOR Floor % of Par Outstanding
Max (Dec 2015) 4.04% 5.01% 0% floor 49.8%
Post-Crisis Average 3.60% 4.75% 0.75% and less 34.4%
Current 3.72% 4.18% 1.00% 14.9%
Long-Term Average 3.25% 5.52% >1.00% 0.1%
Min (June 2007) 2.42% 7.78% No floor 0.8%
Sources: Eaton Vance, St. Louis Federal Reserve, and LCD, an offering of S&P Global Market Intelligence, September 30, 2021. Past performance is not a reliable indicator of future results. All spread and LIBOR floor
data reflects the S&P/LSTA Leveraged Loan Index. Data provided is for informational use only. Credit spread and floor benefit data are shown on a weighted average basis. LIBOR floor benefit is measured as the difference
between prevailing LIBOR rates and the average LIBOR floor. Data excludes facilities in default.23 Floating-Rate Loan Market Monitor | Q3 2021
Market update
Special topic: LIBOR transition
What does LIBOR’s end mean for loans? LIBOR vs SOFR
In 2017, the Alternative Reference Rate Committee (ARRC), a
2.75%
panel convened by the U.S. Federal Reserve, selected the Secured
1-Month LIBOR
Overnight Financing Rate (SOFR) as a replacement for U.S. 2.50%
LIBOR to be effective no later than the end of 2021.
2.25%
SOFR reflects a broad universe of overnight U.S. Treasury repo
2.00%
activity based on more than $800 billion in daily transactions.
1.75% 30-Day Average SOFR
In November 2020, U.S. and U.K. banking regulators announced
1.50%
that the December 31, 2021 sunset for LIBOR would remain in
place for newly originated loans. 1.25%
However, they added that most U.S. dollar (USD) LIBOR maturities 1.00%
could be extended to June 2023 for legacy contracts only.
0.75%
Newly issued LIBOR-based loans will soon be a thing of the past,
0.50%
and sometime later this year we expect to see the birth of SOFR-
0.25%
based loans.
0.00%
Meantime, the extension to remediate existing LIBOR-based loans May Sep Jan May Sep Jan May Sep Jan May Sep
2018 2018 2019 2019 2019 2020 2020 2020 2021 2021 2021
to mid-2023 means that the asset class has a nice long runway to
make a smooth transition.
Sources: Eaton Vance, St. Louis Federal Reserve, September 30, 2021. Past performance is not a reliable indicator of future results. Data provided is for informational use only.24 Floating-Rate Loan Market Monitor | Q3 2021
Market update
Special topic: Collateralized Loan Obligations (CLOs)
Illustrative capital structure for a US CLO CLO Tranche Support
Credit Average
Credit Rating Credit Spread 20%
Enhancement Price
A Credit
AAA 36% 80 – 120 $100.0 18% Support
AA 25% 135 – 170 $99.8
16%
A 17% 175 – 230 $99.7
Default and Loss Rate
BBB 13% 265 – 405 $99.0 14% BBB Credit
Support
BB 8% 575 – 800 $95.6
12%
Comparative Yields for BBB and BB tranches of CLOs 10%
BB Credit
Support
9% 8.3% 8%
6%
Yield to Worst (%)
6%
5.0% 4%
4.6%
3.4% 3.2% 3.2% 2%
3% 2.4% 2.3%
0%
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
0%
CLO BBB US IG Corp US Loans EMD Sov CLO BB US HY US Loans EMD Sov Loss Rate Default Rate
BBB BBB BBB Corp BB BB BB
Sources: Eaton Vance, Citibank Velocity, Macrobond, LCD, an offering of S&P Global Market Intelligence, September 30, 2021. Past performance is not a reliable indicator of future results. Data provided is for
informational use only. All CLO data measures CLO tranches issued after the 2008 financial crisis. Loan data represented by the S&P/LSTA Leveraged Loan Index. US IG Corps represented by the ICE BofA US Corporate
Index 1-10 Year. US HY Corp represented by the ICE BofA US High Yield Index. EMD Sov represented by the J.P. Morgan EM Bond Index (EMBI) Global Diversified. Default and loss rates measure the S&P/LSTA Leveraged
Loan Index, with loss rates based on 65% recovery assumption.25 Floating-Rate Loan Market Monitor | Q3 2021
Market update
Special topic: Volatility of CLOs relative to underlying loans
Post-Crisis CLO Spreads: A, BBB, BB vs. Loans
2000
A BBB BB Loans
1800
1600
1400
1200
Spread (bps)
1000
800
600
400
200
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Sources: Citibank Velocity and LCD, an offering of S&P Global Market Intelligence, September 30, 2021. Past performance is not a reliable indicator of future results. Data provided is for informational use only. All CLO
data measures CLO tranches issued after the 2008 financial crisis. Loans represented by the S&P/LSTA Leveraged Loan Index and show spread-to-maturity.Portfolio Applications
27 Floating-Rate Loan Market Monitor | Q3 2021
Portfolio applications
Loans among higher yielding asset classes with little duration
6
EM Sovereign (USD)
5
Floating-Rate Loans1
4 High-Yield Corp.
Yield to Worst (%)
3
Investment Grade Corp.
2
MBS Aggregate
Municipal Treasury
1
0
0 1 2 3 4 5 6 7 8 9
Duration
Sources: Eaton Vance, Bloomberg, JPMorgan, ICE Data Indices, LLC, and LCD, an offering of S&P Global Market Intelligence, September 30, 2021. Past performance is not a reliable indicator of future results. Data
provided is for informational use only. It is not possible to invest directly in an Index. Yield to worst is the lowest potential yield that can be received on a bond without an issuer actually defaulting. Duration is a measure of the
sensitivity of a bond’s price to a change in interest rates. Treasury represented by Bloomberg U.S. Treasury Index. Agency represented by Bloomberg U.S. Agency Index. Aggregate represented by Bloomberg U.S. Aggregate
Index. MBS represented by Bloomberg U.S. Mortgage Backed Securities (MBS) Index. Investment-Grade Corp. represented by Bloomberg U.S. Corporate Index. Municipal represented by Bloomberg Municipal Bond Index. EM
Sovereign (USD) represented by J.P. Morgan EM Bond Index (EMBI) Global Diversified Index. High-Yield Corp. represented by Bloomberg U.S. Corporate High Yield Index. Floating-Rate Loans represented by S&P/LSTA
Leveraged Loan Index. 1Yield to maturity is shown for loans.28 Floating-Rate Loan Market Monitor | Q3 2021
Portfolio applications
Floating-rate structure key driver of negative correlation with bonds
1.00
1.0
0.89
0.82
0.8
0.6 0.55
0.49
Correlation to 10-Year US Treasuries
0.4
0.2
0.10
0.0
-0.2
-0.18
-0.4 -0.33
-0.6
-0.8
-1.0
Treasury Aggregate MBS Municipal Investment-Grade EM Sovereign (USD) High-Yield Corp Floating-Rate Loans
Corp
Source: Morningstar, September 30, 2021. Past performance is not a reliable indicator of future results. Data provided is for informational use only. It is not possible to invest directly in an Index. See end of material for
important additional information and disclosures. Correlation is a statistical measure of how two securities perform in relation to each other. Treasury represented by Bloomberg U.S. Treasury Index. Agency represented by
Bloomberg U.S. Agency Index. Aggregate represented by Bloomberg U.S. Aggregate Index. MBS represented by Bloomberg U.S. Mortgage Backed Securities (MBS) Index. Investment-Grade Corp. represented by
Bloomberg U.S. Corporate Index. Municipal represented by Bloomberg Municipal Bond Index. EM Sovereign (USD) represented by J.P. Morgan EM Bond Index (EMBI) Global Diversified Index. High-Yield Corp. represented
by Bloomberg U.S. Corporate High Yield Index. Floating-Rate Loans represented by S&P/LSTA Leveraged Loan Index.29 Floating-Rate Loan Market Monitor | Q3 2021
Portfolio applications
Loan yields are competitive with high-yield bonds and EM debt
12%
10%
8%
Yield to Worst
6%
Emerging Markets
5.11%
Floating-Rate Loans
4% 4.19%1
High-Yield Bonds
4.09%
2%
US Aggregate
1.56%
0%
'14 '15 '16 '17 '18 '19 '20 '21
Sources: LCD, an offering of S&P Global Market Intelligence, Bloomberg, ICE Data Indices, LLC, J.P. Morgan, September 30, 2021. Past performance is not a reliable indicator of future results. Data provided is for
informational use only. Loans represents the S&P/LSTA Leveraged Loan Index. High-Yield Bonds presents the ICE BofA US High Yield Index. Emerging Markets represents the J.P. Morgan EMBI Global Diversified. US
Aggregate represents the Bloomberg US Aggregate Bond Index. 1Yield to maturity is shown for loans.30 Floating-Rate Loan Market Monitor | Q3 2021
Portfolio applications
Loan vs. bond performance in various interest-rate environments
Distribution of All Rolling 1-Year Return Periods: 1992-2021
130 Rising Rate Periods
Bonds Avg. Return for 130 1-Year Periods
Outperformed
Loans: 6.30%
130
Rising Bonds: 3.79%
Rate
Periods 117
Falling 98 Flat Rate Periods
Rate
Avg. Return for 98 1-Year Periods
Periods
Loans: 6.40%
Loans Bonds: 5.03%
Outperformed
98 Flat
Rate Periods 117 Falling Rate Periods
Avg. Return for 117 1-Year Periods
Loans: 2.24%
Bonds: 7.80%
Sources: Eaton Vance, Credit Suisse, Bloomberg, Federal Reserve, September 30, 2021. Past performance is not a reliable indicator of future results. Data provided is for informational use only. It is not possible to invest
directly in an Index. See end of report for important additional information. Loans are represented by Credit Suisse Institutional Leveraged Loan Index and bonds are represented by the Bloomberg U.S. Aggregate Index.
Analysis includes all rolling one-year periods since inception of Credit Suisse Institutional Leveraged Loan Index in 1992. Interest rate periods measures the year over year change in the fed funds rate.31 Floating-Rate Loan Market Monitor | Q3 2021
Portfolio applications
Performance tendencies: Historical relationship of loans to bonds
Loan Index vs Bond Index (12-Month Relative Rolling Returns)
50% 8%
40% Differential 5Y Treasury Yield
Loans Outperform 7%
30%
6%
20%
Loans vs Bonds Excess Return
5-Year Treasury Yield
5%
10%
0% 4%
-10%
3%
-20%
2%
-30%
Bonds Outperform
1%
-40%
-50% 0%
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Sources: LCD, an offering of S&P Global Market Intelligence, Bloomberg, Federal Reserve, Eaton Vance, September 30, 2021. Past performance is not a reliable indicator of future results. Data provided is for
informational use only. It is not possible to invest directly in an Index. See end of report for important additional information. Loans are represented by S&P/LSTA Leveraged Loan Index and bonds are represented by the
Bloomberg U.S. Aggregate Index. Analysis includes all rolling 12-month periods since inception of S&P/LSTA Leveraged Loan Index in 1997.About Eaton Vance
33 Floating-Rate Loan Market Monitor | Q3 2021
Eaton Vance for floating-rate loans
The advantage of Eaton Vance’s experience
Measurable track record since 1989
0 5 10 15 20 25 30 35
Significant floating-rate loan investment
Eaton Vance
resources and specialization (Since 1989)
Extensive contiguous experience of
investment team
Long-term record of delivering incremental
outperformance with lower volatility than the
S&P/LSTA Leveraged Loan Index Median
13 Years
Continuity of philosophy, process and team
over time
Systematic risk-weighted portfolio
construction underpinned by bottom-up
credit research
Eaton Vance (1989) Competitor Floating-Rate Loan Managers
Source: eVestment, December 31, 2020. Past performance is not a reliable indicator of future results. Data provided is for informational use only. It is not possible to invest directly in an Index. See end of material for
important additional information and disclosures. Based on eVestment Floating-Rate Bank Loan Fixed Income universe using oldest investment offering for each firm.34 Floating-Rate Loan Market Monitor | Q3 2021
Eaton Vance for floating-rate loans
Investment team with extensive contiguous experience
TEAM LEADERSHIP
Andrew Sveen, CFA Craig Russ
Co-Director, Portfolio Manager Co-Director, Portfolio Manager
26 Years of Experience 35 Years of Experience
22 Years at the Firm 24 Years at the Firm
CREDIT RESEARCH TRADING
John Redding Ralph Hinckley, CFA Catherine McDermott Michael Turgel, CFA Jake Lemle, CFA
Portfolio Manager Senior Credit Analyst, Portfolio Manager Senior Credit Analyst, Portfolio Manager Senior Credit Analyst, Portfolio Manager Director of Loan Trading & Capital Markets
36 Years of Experience 24 Years of Experience 33 Years of Experience 18 Years of Experience 14 Years of Experience
23 Years at the Firm 18 Years at the Firm 20 Years at the Firm 15 Years at the Firm 14 Years at the Firm
Kathryn Thompson
Audrey Grant** Jeff Hesselbein, CFA Heath Christensen, CFA Brian Hickey, CFA Trader
Credit Analyst Senior Credit Analyst, Portfolio Manager Senior Credit Analyst, Portfolio Manager Senior Credit Analyst 9 Years of Experience
5 Years of Experience 24 Years of Experience 22 Years of Experience 24 Years of Experience 2 Years at the Firm
5 Years at the Firm 21 Years at the Firm 18 Years at the Firm 1 Year at the Firm
Sarah Choi William Holt, CFA Daniel McElaney, CFA Christopher Reese
Senior Credit Analyst Senior Credit Analyst, Portfolio Manager Senior Credit Analyst, Portfolio Manager Trader
14 Years of Experience 19 Years of Experience 18 Years of Experience 3 Years of Experience
1 Years at the Firm 16 Years at the Firm 16 Years at the FirmAdditional Information
36 Floating-Rate Loan Market Monitor | Q3 2021
Important information and disclosure
ABOUT RISK:
Floating-Rate Loans: An imbalance in supply and demand in the income INDEX DEFINITIONS:
market may result in valuation uncertainties and greater volatility, less Bloomberg Global Aggregate Ex-USD Index is a broad-based measure of
liquidity, widening credit spreads and a lack of price transparency in the global investment grade fixed-rate debt investments, excluding USD-
market. There can be no assurance that the liquidation of collateral denominated debt.
securing an investment will satisfy the issuer’s obligation in the event of Bloomberg Municipal Bond Index is an unmanaged index of municipal bonds
nonpayment or that collateral can be readily liquidated. The ability to traded in the U.S.
realize the benefits of any collateral may be delayed or limited.
Investments in income securities may be affected by changes in the Bloomberg U.S. Agency Index measures agency securities issued by U.S
creditworthiness of the issuer and are subject to the risk of non–payment government agencies, quasi-federal corporations, and corporate or foreign debt
of principal and interest. The value of income securities also may decline guaranteed by the U.S. government.
because of real or perceived concerns about the issuer’s ability to make
Bloomberg U.S. Aggregate Index is an unmanaged index of domestic
principal and interest payments. Borrowing to increase investments
investment-grade bonds, including corporate, government and mortgage-backed
(leverage) will exaggerate the effect of any increase or decrease in the
securities.
value of investments. Investments rated below investment grade (typically
referred to as “junk”) are generally subject to greater price volatility and Bloomberg U.S. Corporate Index is an unmanaged index that measures the
illiquidity than higher rated investments. As interest rates rise, the value of performance of investment-grade corporate securities within the Bloomberg U.S.
certain income investments is likely to decline. Bank loans are subject to Aggregate Index.
prepayment risk. Investments in foreign instruments or currencies can
involve greater risk and volatility than U.S. investments because of Bloomberg U.S. Mortgage Backed Securities (MBS) Index measures agency
adverse market, economic, political, regulatory, geopolitical or other mortgage-backed pass-through securities issued by GNMA, FNMA, and FHLMC.
conditions. Changes in the value of investments entered for hedging Bloomberg U.S. Treasury Index measures public debt instruments issued by
purposes may not match those of the position being hedged. the U.S. Treasury.
Duration – Securities with longer durations tend to be more sensitive to Credit Suisse Institutional Leveraged Loan Index is an unmanaged index of
interest rate changes than securities with shorter durations. Equity – the institutional leveraged loan market.
Equity investment values are sensitive to stock market volatility. Gov’t
Agency – While certain U.S. Government-sponsored agencies may be JPMorgan Emerging Markets Bond Index Plus (EMBI+) is a market-cap
chartered or sponsored by acts of Congress, their securities are neither weighted index that measures USD-denominated Brady Bonds, Eurobonds, and
issued nor guaranteed by the U.S. Treasury. Maturity – Longer-term bonds traded loans issued by sovereigns.
typically are more sensitive to interest rate changes than shorter-term Standard & Poor’s 500 Index is an unmanaged index of large-cap stocks
bonds. Prepayment – MBS – Mortgage-backed securities are subject to commonly used as a measure of U.S. stock market performance.
prepayment risk. Smaller Companies – Smaller companies are generally
subject to greater price fluctuations, limited liquidity, higher transaction S&P/LSTA Leveraged Loan Index is an unmanaged index of the institutional
costs and higher investment risk than larger, established companies. leveraged loan market.37 Floating-Rate Loan Market Monitor | Q3 2021 Important information and disclosure ABOUT ASSET CLASS COMPARISONS: Elements of this report include comparisons of different asset classes, each of which has distinct risk and return characteristics. Every investment carries risk, and principal values and performance will fluctuate with all asset classes shown, sometimes substantially. Asset classes shown are not insured by the FDIC and are not deposits or other obligations of, or guaranteed by, any depository institution. All asset classes shown are subject to risks, including possible loss of principal invested. The principal risks involved with investing in the asset classes shown are interest-rate risk, credit risk and liquidity risk, with each asset class shown offering a distinct combination of these risks. Generally, considered along a spectrum of risks and return potential, U.S. Treasury securities (which are guaranteed as to the payment of principal and interest by the U.S. government) offer lower credit risk, higher levels of liquidity, higher interest-rate risk and lower return potential, whereas asset classes such as high-yield corporate bonds and emerging market bonds offer higher credit risk, lower levels of liquidity, lower interest-rate risk and higher return potential. Other asset classes shown carry different levels of each of these risk and return characteristics, and as a result generally fall varying degrees along the risk/return spectrum. Costs and expenses associated with investing in asset classes shown will vary, sometimes substantially, depending upon specific investment vehicles chosen. No investment in the asset classes shown is insured or guaranteed, unless explicitly stated for a specific investment vehicle. Interest income earned on asset classes shown is subject to ordinary federal, state and local income taxes, excepting U.S. Treasury securities (exempt from state and local income taxes) and municipal securities (exempt from federal income taxes, with certain securities exempt from federal, state and local income taxes). In addition, federal and/or state capital gains taxes may apply to investments that are sold at a profit. Eaton Vance does not provide tax or legal advice. Prospective investors should consult with a tax or legal advisor before making any investment decision. ICE BofA Indexes: Unless otherwise stated, index returns do not reflect the effect of any applicable sales charges, commissions, expenses, taxes or leverage, as applicable. It is not possible to invest directly in an index. Historical performance of indexes illustrates market trends and does not represent the past or future performance of any fund. ICE BofA™ indices not for redistribution or other uses; provided "as is", without warranties, and with no liability. Eaton Vance has prepared this report, ICE BofA does not endorse it, or guarantee, review, or endorse Eaton Vance's products. Credit ratings that may be referenced are based on Moody's, S&P or Fitch, as applicable. Credit ratings are based largely on the rating agency's investment analysis at the time of rating and the rating assigned to any particular security is not necessarily a reflection of the issuer's current financial condition. The rating assigned to a security by a rating agency does not necessarily reflect its assessment of the volatility of a security's market value or of the liquidity of an investment in the security. Ratings of BBB or higher by Standard and Poor's or Fitch (Baa or higher by Moody's) are considered to be investment grade quality.
38 Floating-Rate Loan Market Monitor | Q3 2021
Important additional information and disclosure
Source of all data: Eaton Vance, as at September 30, 2021, unless otherwise specified. This material is for Professional Clients/Accredited Investors only.
This material is presented for informational and illustrative purposes only. This material This material does not constitute an offer to sell or the solicitation of an offer to buy any
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About Eaton Vance
Eaton Vance is part of Morgan Stanley Investment Management, the asset management division of Morgan Stanley. It provides advanced investment strategies and wealth management solutions to
forward-thinking investors around the world. Through its distinct investment brands Eaton Vance Management, Parametric, Atlanta Capital and Calvert, the Company offers a diversity of investment
approaches, encompassing bottom-up fundamental active management, responsible investing, systematic investing and customized implementation of client-specified portfolio exposures. Exemplary
service, timely innovation and attractive returns across market cycles have been hallmarks of Eaton Vance since 1924.
@2021 Eaton Vance Management 6140 | 10.06.2021
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