Fixed Income Year-to-Date Returns

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Fixed Income Indices Returns & YieldsAs of December 31, 2020

9.4%9.9%

10.8% 10.9%

6.1%

9.1%

3.9%

1.7%

2.8%

0.3%

3.2%

5.4%

8.0%

3.9%

9.1% 9.0%8.3%

-0.9%

4.5%3.9%

2.5%

5.5% 5.3%

7.1%

-2%

0%

2%

4%

6%

8%

10%

12%

Fixed Income Year-to-Date ReturnsDecember 31, 2019, through December 31, 2020

2.8%

2.5% 2.7% 3.

2%

5.7%

4.0%

5.4%

10.7

%

6.3%

4.2%

6.0%

18.5

%

1.8% 2.

5%

2.5%

2.4%

4.4%

2.1%

3.9%

3.0%

5.4%

4.9%

4.8%

1.7%

1.5%

1.6% 2.

1%

4.4%

3.3% 4.

5%

7.1%

5.1%

3.3% 4.

6%

13.5

%

0.6% 1.

3%

1.3%

1.1%

5.3%

0.5%

3.7%

1.5%

4.3% 4.6%

4.0%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Fixed Income YieldsDecember 31, 2019, versus December 31, 2020

Source: Bloomberg, DoubleLine


2

-9.3%

-5.7%-8.4%

-12.9%

-20.1%-17.9%

-20.0%

-26.0%

-17.5%-17.4%-17.5%-18.6%

6.3%

0.9%

-9.4%

3.2%

0.0%

-6.9%

-0.7%

-11.6%

-6.7%

-22.9%

-17.2%

-11.6%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

Fixed Income Returns Prior to Fed March 23 AnnouncementDecember 31, 2019, through March 20, 2020


In response to the COVID-19 pandemic and the subsequent financial market illiquidity, the Federal Open Market Committee (FOMC) announced on Monday, March 23, 2020 several monetary tools to help buoy financial markets. The FOMC announcement included the following: the second of two intrameeting interest rate cuts, a removal of previous limits for asset purchases of U.S. Treasury securities and Agency mortgage-backed securities (MBS), the inclusion of Agency Commercial MBS in purchases and several facilities designed to support certain segments of the market:

• Primary Market Corporate Credit Facility (PMCCF)

• Secondary Market Corporate Credit Facility (SMCCF)

• Term Asset-Backed Securities Loan Facility (TALF)

• An expansion of the Money Market Mutual Fund Liquidity Facility (MMLF)

• An expansion of the Commercial Paper Funding Facility (CPFF)

March 23, 2020 marked the bottom of most risk asset indices year-to-date, and subsequently represents the wide mark in most fixed income credit spreads. The chart below lists returns of various fixed income indices prior to the March 23 FOMC announcement. At that time, the Bloomberg Barclays U.S. Credit Index was down 9.3%, while the Credit Suisse U.S. Liquid High Yield Index was down 20.1%.


3

7.4% 7.2%9.8% 8.2% 8.1%

10.2%

7.2%

4.1%

7.4%

11.8%

6.7%

-4.2%

1.6% 2.4%

-4.0%

1.2% 1.8%

-14.7%

0.9% 0.9%2.6%

-17.8%

4.7%

2.1%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Fixed Income Returns Post Fed March 23 AnnouncementMarch 23, 2020, through April 8, 2020


In the two weeks following the March 23 announcement, fixed income returns were largely bifurcated. Areas of fixed income directly included in any of the various Fed programs, such as U.S. investment grade and high yield corporate credit, significantly outperformed areas that were not directly supported, including non-Agency residential MBS, emerging market corporate and sovereign debt, and lower-rated tranches of private-label CMBS and collateralized loan obligations.

In the period of March 23 – April 8, 2020 the Bloomberg Barclays U.S. Credit Index returned 7.4% and the Credit Suisse U.S. Liquid High Yield Index returned 8.1%. Worth noting, the majority of these returns were on the back of improved sentiment in these markets and robust issuance rather than the utilization of the announced credit facilities: The SMCCF did not begin purchasing eligible ETFs until May 12 and corporate bonds until June 16, while the PMCCF began its operations on June 29.

On April 9, the Fed announced additional monetary policy to support the economy, providing up to $2.3 trillion in loans. This additional support by the Fed included: the Main Street Lending Program, Municipal Liquidity Facility, Paycheck Protection Program, and increases to the size of both the Term Asset-Backed Securities Loan Facility (TALF), as well as the Corporate Credit Facilities (Primary and Secondary Market Corporate Credit Facility).


4

12.2%

8.7% 10.2%

17.7%

22.9% 20.7% 21.2%

32.0%

16.0%

8.7%

17.1%

35.1%

-0.1%

0.6%

25.4%

4.4%6.5%

24.9%

4.3%

16.5%

7.1%

31.5%

21.4%18.7%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Fixed Income Returns Post-Fed April 9 AnnouncementApril 9, 2020, through December 31, 2020


Since the April 9 Fed announcement, many areas of fixed income credit not directly supported by the Fed facilities outperformed areas of credit that are supported. In the chart above, lower credit quality securities not supported by the Fed generally outperformed investment grade corporate bonds as the risk-on rally continued through November.

On November 19, Treasury Secretary Steven Mnuchin announced his intent to allow many existing Fed facilities to expire at year end; namely the Primary Market Corporate Credit Facility, Secondary Market Corporate Credit Facility, Municipal Liquidity Facility, Main Street Lending Program, and the Term Asset-Backed Securities Loan Facility.


5

Investment Grade: Bloomberg Barclays US Credit Total Return Value Unhedged USD Index - Measures the investment grade, US dollar-denominated, fixed-rate, taxable corporate and government related bond markets. It is composed of the US Corporate Index and a non-corporate component that includes foreign agencies, sovereigns, supranationals and local authorities.Investment Grade-AAA, Investment Grade-A, Investment Grade-BBB: Credit Suisse Liquid US Corporate Index - A composite universe of the liquid, tradable, US dollar-denominated high grade issues. The index is trader priced daily, thereby providing a highly accurate picture of market performance for active portfolio managers.High Yield, High Yield-BB, High Yield-B, High Yield-CCC: Credit Suisse US Liquid High Yield Index - The Index is calculated each trading day and is a market-capitalised weighted index. It tracks only the liquid, tradable portion of the high yield U.S. corporate bond market. Leveraged Loan, Loans-BB, Loans-B, Loans-CCC: Credit Suisse Liquid Leveraged Loan Index - The Credit Suisse Leveraged Loan Index is designed to mirror the investable universe of the $US-denominated leveraged loan market, with an inception date of January 1992. The indices are rebalanced monthly on the last business day of the month instead of daily rebalancing. The Liquid Leveraged loan Index has an incpetion date of June 30th 2008. UST: Bloomberg Barclays US Treasury Total Return Unhedged USD Index - Measures US dollar-denominated, fixed-rate, nominal debt issued by the US Treasury. Treasury bills are excluded by the maturity constraint, but are part of a separate Short Treasury Index. STRIPS are excluded from the index because their inclusion would result in double-counting.Agency MBS: Bloomberg Barclays US Agency MBS Fixed Rate 1-10yr ex Sub TR Index - A subset of the larger Bloomberg Barclays US MBS Index that tracks fixed-rate agency mortgage-backed pass-through securities guaranteed by Ginnie Mae, Fannie Mae, and Freddie Mac, this Index focused on Fixed Rate 1-10 year securities minus sub-TR securities.Non-Agency MBS: Markit iBoxx Broad US Non-Agency RMBS Index - Consists of 27 sub-indices referencing approximately 350 senior bonds from a portfolio of 22,000 RMBS issued between 2005 and 2007. These sub-indices are divided into four categories: prime, sub-prime, Alt-A and Option ARM. They are further broken down by vintage to allow for granular performance analysis.Agency CMBS, CMBS-AAA, CMBS-BBB: Bloomberg Barclays US CMBS Fixed Rate - A fixed-rate, investment-grade benchmark that tracks the market for multi-family CMBS debt issued by US government agencies, Freddie Mac and Fannie Mae. The Bloomberg Barclays US CMBS Investment Grade Aaa Index and the Bbb Index measures both the Aaa-rated and Bbb-rated markets of US Agency and US Non-Agency conduit and fusion CMBS deals with a minimum current deal size of $300mn.

ABS-AAA: Bloomberg Barclays Asset-Backed Securities (ABS) Index is the ABS component of the Bloomberg Barclays U.S. Aggregate Index. The Asset-Backed Securities (ABS) Index has three subsectors: credit and charge cards, autos and utility. The index includes pass-through, bullet, and controlled amortization structures. The ABS Index includes only the senior class of each ABS issue and the ERISA-eligible B and C tranche.ABS AA-BBB: ICE BofA AA-BBB US Fixed Rate Asset Backed - A subset of ICE BofAML US Fixed Rate Asset Backed Securities Index including all asset backed securities collateralized by anything other than auto loans, home equity loans, manufactured housing, credit card receivables and utility assets.AAA CLO 2.0, BBB CLO 2.0: JP Morgan Collateralized Loan (CLOIE) Index - A rules-based total return benchmark for broadly-syndicated arbitrage US CLO debt. The index offers extensive coverage, tracking approximately 86% of the total US CLO debt stock with a notional of $458bn as of January 31st, 2019. Representing the entire debt capital structure, the index currently contains 1,013 transactions and 5,528 tranches managed by 152 CLO managers.EMFI Sovereign (USD): JP Morgan EMBI Global Diversified Index - A uniquely-weighted version of the EMBI Global (which tracks total returns for US dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities: Brady bonds, loans, Eurobonds.) It limits the weights of those index countries with larger debt stocks by only including specified portions of these countries’ eligible current face amounts of debt outstanding.EMFI Corporate (USD): JP Morgan Corporate EMBI Broad Diversified Composite Index- The CEMBI tracks total returns of US dollar-denominated debt instruments issued by corporate entities in Emerging Markets countries. Two variations are available: The CEMBI Broad is the most comprehensive corporate benchmark followed by the CEMBI, which consists of an investable universe of corporate bonds. The Federal Open Market Committee (FOMC) on March 23, 2020 announced the second of two intra-meeting interest rate cuts and removed the previous limit for asset purchases of UST and Agency MBS of $500B and $200B, respectfully. Agency CMBS were included in their purchases of Agency MBS. The FOMC also announced several facilities designed to support certain segments of the debt market including: The Primary Market Corporate Credit Facility (PMCCF), the Secondary Market Corporate Credit Facility (SMCCF), the term Asset-Backed Securities Loan Facility (TALF), an expansion of the Money Market Mutual Fund Liquidity Facility (MMLF), and an expansion of the existing Commercial Paper Funding Facility (CPFF).

Important Information Regarding This MaterialIssue selection processes and tools illustrated throughout this presentation are samples and may be modified periodically. These are not the only tools used by the investment teams, are extremely sophisticated, may not always produce the intended results and are not intended for use by non-professionals.DoubleLine has no obligation to provide revised assessments in the event of changed circumstances. While we have gathered this information from sources believed to be reliable, DoubleLine cannot guarantee the accuracy of the information provided. Securities discussed are not recommendations and are presented as examples of issue selection or portfolio management processes. They have been picked for comparison or illustration purposes only. No security presented within is either offered for sale or purchase. DoubleLine reserves the right to change its investment perspective and outlook without notice as market conditions dictate or as additional information becomes available. This material may include statements that constitute “forward-looking statements” under the U.S. securities laws. Forward-looking statements include, among other things, projections, estimates, and information about possible or future results related to a client’s account, or market or regulatory developments.

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Fixed Income Year-to-Date Returns

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