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Global Fixed Income Bulletin
July 22, 2022

Oh, What a Month, Quarter and Year!

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July 22, 2022

Oh, What a Month, Quarter and Year!

Global Fixed Income Bulletin

Oh, What a Month, Quarter and Year!

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July 22, 2022


The tectonic plates of inflation and recession collided in June with recession winning, at least for now. Economic data continued to underperform, surprising to the downside in general, with central banks continuing or even intensifying their hawkishness. As a result, financial market performance in June and year to date cannot be characterized as anything but historic; unfortunately, historically bad! Indeed, global credit markets have experienced their worst first half performance on record. June bond returns ranged from -0.88% for U.S. Treasuries to -9.19% for emerging markets (EM) external high yield, pushing year-to-date returns into double digit negative territory.1 What is truly astonishing about 2022 has been not just that all fixed income returns have been deeply negative but that the dispersion of returns has been so small. In EM, high grade and high yield returns have been -19.69% and 20.96% respectively while U.S. High Yield has returned -14.04% while U.S. Investment Grade returned -14.39%.2 It has not mattered how you managed credit versus duration risk, both have been equally bad. In this risk-off context, it is not surprising the dollar rose substantially, confounding many long-term dollar bears.


Government bond markets were not exempt from the volatility, but hope did materialize mid-month as yields fell. First, U.S. Treasury 10-year yields rose 62 basis points (bps) in the first 14 days of the month as high inflation prints (May U.S. Consumer Price Index release printed 8.6%, higher than expected) and Fed hawkishness (larger than expected 75bps rate hike and a substantial increase in their “dot plot”) pushed the Fed’s median rate forecast to 3.8% for end-2023. Then, they rallied 46bps over the remainder of the month as recession fears rose substantially and, remarkably, the market began to price out rate hikes the Fed had just penciled in. Even with recession probabilities rising significantly, government bond yields still went up over the month. Tightening expectations fell even more significantly in Europe, with expected rate hikes reduced 60-90 bps across the ECB, Swedish and Norwegian central banks. Whether or not this is warranted remains to be seen, emphasizing, once again, the importance of central bank policy outcomes for the months ahead.

DISPLAY 1: Asset Performance Year-to-Date

Note: USD-based performance. Source: Bloomberg. Data as of June 30, 2022. The indexes are provided for illustrative purposes only and are not meant to depict the performance of a specific investment. Past performance is no guarantee of future results. See below for index definitions.


Credit markets did not like either scenario (inflation or recession) so underperformed the whole month: U.S. IG spreads widened 25bps while U.S. HY spreads widened 163bps. European bonds did even worse with governments tracking Treasuries weaker and European corporates doing worse.2 The European energy crisis continues to drive inflation higher, with no respite in sight, leaving the European Central Bank (ECB) with little room to maneuver. However, recession fears came to dominate inflation worries and despite inflation making new highs in Europe (and likely to continue to do so over the third quarter) German 2-year yields fell 58bps over the second half of June, mirroring U.S. Treasury performance.

The roller coaster is keeping volatility high. The collapse in commodity prices in recent weeks reflects market sentiment shifting away from inflation hedges and towards growth hedges (government bonds). The market now prices inflation will be back below 2% by 2025 in both the Eurozone and the U.S. For the first time this year, government bonds began to behave as a hedge to cyclical risk, with developed market government bonds rallying as credit markets sold off. Of course, this improved performance hinges critically on reduced central bank hawkishness, leading to investors pricing less rate hikes across the yield curve. Whether or not this is justified remains to be seen as core inflation has yet to convincingly peak and turn down. No doubt, the significant drop in commodity prices (assuming it persists) should reduce headline inflation in coming months (outside of Europe) and also, perversely for the economic pessimists, boost consumer and business sentiment, reducing the probability of recession.

DISPLAY 2: Currency Monthly Changes Versus U.S. Dollar

Note: Positive change means appreciation of the currency against the USD. Source: Bloomberg. Data as of June 30, 2022.

DISPLAY 3: Major Monthly Changes in 10-Year Yields and Spreads

Source: Bloomberg, JPMorgan. Data as of June 30, 2022.


Fixed Income Outlook

June market performance emphasized once again the unusual time we live in. Volatility continues at levels rarely seen over the last two decades, with markets zigging and zagging between inflation and recession fears. Clarity remains lacking as to where economies and markets will eventually end up, but we do know some things. Despite fears of recession, the U.S. labor market and household income growth remain solid. June’s labor market report released on July 8th emphasized the continuing strength and resiliency of job growth. Indeed, no recession is imminent with monthly job growth of 300,000+. As a comparison, for the decade 2010-2019, U.S. job growth averaged less than 200,000 per month. Job growth, which further squeezes a tight labour market, will, we believe, make it very difficult for inflation to come down. Moreover, to slow inflation meaningfully, real rates need to rise. While they have risen substantially from the beginning of the year, it is not yet obvious, despite weakening data, that they are high enough to slow wage growth and the housing market, two key drivers of core inflation.

The market’s fading of the Fed’s “dot plot” peak of the Fed funds rate and the fading of inflation risk (falling forward inflation rates) is ambitious to say the least. Falling inflation means growth slows below trend and unemployment rates rise. So far, the growth slowdown could just be a midcycle adjustment from unsustainably rapid growth in 2021 (in both nominal and real terms). It is also possible that inflation remains elevated if the economy is weakened; i.e, a stagflationary scenario, which means the Fed is reluctant to stop tightening. As such it is premature to believe the slowdown occurring will continue or be significant enough to return inflation to the Fed’s target. Inflation could be stickier than the market thinks. Similar situations exist in Europe and Asia. While we may see inflation peak this summer, in year-on-year terms, it implies the Fed is unlikely to ease as fast as market optimism suggests (2023 rate cuts). Moreover, although economic conditions look more challenging for Europe given the energy situation, the dramatic repricing of rate hikes (lower) in June also looks aggressive. Inflation in Europe shows no sign of peaking (even if most of the rise is due to supply chain/energy issues). Unless the Eurozone economy slips into recession, market forecasts of less ECB rate hikes look premature, which will likely put upward pressure on European bond yields as well.

Central banks are hawkish for a reason. Inflation in most emerging markets continue to make new highs, even though they began raising rates sooner than advanced economy central bankers. This may imply that there is more tightening to come in advanced economies rather than suggesting EM central banks are nearly done. Despite evidence that growth in manufacturing has slowed significantly, the service sector of economies, as evidenced by June’s Institute for Supply Management service sector report, remains in strong expansionary territory. Anecdotal evidence from the travel industry still points to robust pent-up demand for consumer services alongside labor shortages, suggesting service sector inflation will be hard to suppress. If Covid does not come back to derail this recovery, it will be a challenge for disinflation in the goods sectors to be powerful enough to lower inflation sufficiently to halt central bank tightening anytime soon. On the positive side, there is evidence that supply chain logistics are improving, albeit slowly, which should bode well for improved access to goods and lower prices.

Corporate bond performance is also likely to be volatile. Both IG and HY markets reflect expectations that bad news will continue to arrive (weaker earnings, weaker economy, tighter monetary policy). Spreads have moved above the levels normally associated with a healthy economy, meaning they price in a meaningful probability of a recession relatively soon. But there is unlikely to be a recession this year, given the momentum in labor markets and healthy household and corporate balance sheets, implying that credit markets are undervalued relative to current fundamentals. But increasingly restrictive monetary policy means growth will continue to be under pressure. Q2/Q3 reporting will be key in understanding the robustness of business models to input cost inflation and a slowing economy. We continue to be cautiously optimistic on credit given the cheap to current fundamentals but our expectation of deterioration. We still think a soft landing is likely (although less likely than three months ago) with supply chains improving, commodity prices down and central banks not rushing to raise rates once neutral/slightly restrictive levels are achieved.

Emerging Markets continue to struggle, but opportunities are arising as there are now countries that price in meaningfully probability of default where we believe it is unwarranted. While EM is likely to struggle as long central banks remain on their current hawkish trajectory and inflation stays high, valuations increasingly price in a highly negative outcome. With risk premiums now generous in some countries, we will look to opportunistically buy, but the asset class still lacks a catalyst to spark a rally.

The U.S. dollar, usually a good barometer of the economic and financial outlook, continues to flash warning signs. It tends to be strong when things are going wrong and there is meaningful downside risk, or when things are too good, inflation is high, and economies need to slow. Well, currently these are the two scenarios most priced into financial markets, meaning the dollar goes up continually. A soft landing, slower growth, lower inflation, no recession is the scenario where the dollar is likely to fall from its clearly lofty levels. While that remains our baseline scenario, it remains a hope rather than a fact.

In summary, portfolio positioning remains cautious. Valuations are more attractive, opportunistic buying makes sense, but risks remain, mostly on the inflation front and central bank reactions to it. We continue to fear inflation more than recession.

Developed Market Rate/ Foreign Currency


Developed market rates were exceptionally volatile in June as the market responded to continued upside inflation surprises, hawkish central banks but then also weaker economic growth data. Initially, rates climbed sharply in response to central banks raising rates more than expected and promising to continue tightening. However, weaker economic activity data then caused yields to fall in the second half of the month as central bank expectations moderated, although 10y government bond yields still ended the month 10-20bps higher. Given higher rates and growth concerns, risk assets in general performed poorly. Medium term inflation breakevens fell below central bank target levels even though inflationary pressures remain strong.3


Given that inflation has yet to disappear despite growing recessionary concerns, the focus remains on central banks: how aggressively and for how long will they keep hiking? Their current rhetoric remains hawkish, but this may change if economic growth slows further. Overall, we see developed market rates remaining volatile given the uncertainty but expect yields to trend higher as long as recession is avoided.

Emerging Market Rate/ Foreign Currency


The selloff in emerging markets debt (EMD) continued through the month. The corporate index within the EMD universe was the best performing, although notably negative during the period. Investors are beginning to more seriously consider the potential for recession in the near term and EMD markets will not be spared.4


We are optimistic on EMD as valuations appear to be compensating investors generously for the risks. The macroeconomic environment is challenging for all areas of capital markets, but it appears EM investors have already priced this more than most. Inflationary pressures, and corresponding central bank reactions, remain the most important factor for the asset class among other factors such as commodity prices, the evolving effects of the war in Ukraine, and China’s zero-Covid policy. We expect markets to place an emphasis on differentiation amongst countries and credits.

Corporate Credit


The May-end rally proved transitory, and weakness returned in June. The Bloomberg U.S. Corporate Index and the Bloomberg European Aggregate Corporate Index both widened over the month. Energy, equities, and commodities finished lower, reflecting the increased expectations of recession/economic slowdown. News continued to be dominated by a deterioration in fundamental expectations.5

Concerns over elevated inflation, the aggressive policy response and rhetoric central banks and growing recession fears contributed to the second worst one-month return for high yield in more than 10 years, second only to March of 2020. The June spread widening was second only June 2008, according to JPMorgan.6

Global convertibles fell for the eighth consecutive month in June, as the dual threats of rising inflation and looming recession spooked global markets. As the convertible market has shifted down steadily, bonds are now sitting on bond floors and accordingly asset class performance in June was more in line with credit than equities in a risk-off month: the Refinitiv Global Convertibles Focus Index was down compared to MSCI Global equities and the Bloomberg Global Credit index.7

The senior corporate loan market also sank in June, though it remained strong relative to other asset classes.8


Looking forward we see investment grade spreads offering attractive valuations that are inconsistent with the fundamentals we see at the individual firm level. Potential catalysts for a rally include Q2 results which confirm issuer performance is stronger than market pricing suggests, or a change in macro sentiment where the risk of a recession is reduced.

We remain cautious on the U.S. high-yield market as we enter the third quarter of 2022. Volatility across risk markets has continued to increase and there is little to suggest the environment for high yield will be become materially more supportive over the near-term. While we have continued conviction in the loan market’s relatively healthy credit picture, the geopolitical situation in Europe clouds the outlook.

Securitized Products


Recession fears caused securitized credit spreads to widen further in June across all mortgage and securitized products, and demand remains tepid overall. Supply is also tapering off as new loan origination slows, and secondary trading activity has also declined. Agency MBS spreads widened further in June and have now widened in 5 of the 6 months in 2022. U.S. Non-agency RMBS, CMBS and ABS spreads all widened substantially again in June, but fundamental credit performance remains healthy overall. European securitized markets spreads also widened though the housing market remains strong.9


Credit spreads for many securitized sectors have returned to levels last seen at the depths of the pandemic, but credit conditions are materially better today. We believe the majority of spread widening is due to supply-demand dynamics, with near record Q1 issuance and tepid demand, due to interest rates rising, rather than fundamental credit concerns. We remain constructive on securitized credit and believe sector and security selection will become more important in the coming years if the economy softens.


The views and opinions expressed are those of the Portfolio Management team as of June 2022 and are subject to change based on market, economic and other conditions. Past performance is not indicative of future results.

1 Source: Bloomberg, as of June 30, 2022. Treasuries represented by Bloomberg US Treasuries Total Return Index Value Unhedged USD; EM external represented by JPM EMBI Global Diversified, High Yield Sub-Index; EM high grade and high yield represented by JPM EMBI Global Diversified, Investment Grade and High Yield Sub-Indices.

2 Source: Bloomberg, as of June 30, 2022. High yield and investment grade represented by ICE BAML US High Yield Index; Bloomberg US Corporate Investment Grade.

3 Source: Bloomberg. Data as of June 30, 2022.

4 Source: Bloomberg. Data as of June 30, 2022. EM corporates represented by The JP Morgan CEMBI Broad Diversified Index.

5 Source: Bloomberg Indices: U.S. Corporate Index and the European Aggregate Corporate  Index. Data as of June 30, 2022.

6 Source: Bloomberg U.S. Corporate High Yield Index. Data as of June 30, 2022.

7 Source: Refinitiv Global Convertibles Focus Index. Data as of June 30, 2022.

8 Source: S&P/LSTA Leveraged Loan Index. Data as of June 30, 2022.

9 Source: Bloomberg, as of June 30, 2022.


Risk Considerations

Diversification neither assures a profit nor guarantees against loss in a declining market.

There is no assurance that a portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that the market values of securities owned by the portfolio will decline and that the value of portfolio shares may therefore be less than what you paid for them. Market values can change daily due to economic and other events (e.g. natural disasters, health crises, terrorism, conflicts and social unrest) that affect markets, countries, companies or governments. It is  difficult to predict the timing, duration, and potential adverse effects (e.g. portfolio liquidity) of events. Accordingly, you can lose money investing in a portfolio. Fixed-income securities are subject to the ability of an issuer to make timely principal and interest payments (credit risk), changes in interest rates (interest rate risk), the creditworthiness of the issuer and general market liquidity (market risk). In a rising interest-rate environment, bond prices may fall and may result in periods of volatility and increased portfolio redemptions. In a declining interest-rate environment, the portfolio may generate less income. Longer-term securities may be more sensitive to interest rate changes. Certain U.S. government securities purchased by the strategy, such as those issued by Fannie Mae and Freddie Mac, are not backed by the full faith and credit of the U.S. It is possible that these issuers will not have the funds to meet their payment obligations in the future. Public bank loans are subject to liquidity risk and the credit risks of lower-rated securities. High-yield securities (junk bonds) are lower-rated securities that may have a higher degree of credit and liquidity risk. Sovereign debt securities are subject to default risk. Mortgage- and asset-backed securities are sensitive to early prepayment risk and a higher risk of default, and may be hard to value and difficult to sell (liquidity risk). They are also subject to credit, market and interest rate risks. The currency market is highly volatile. Prices in these markets are influenced by, among other things, changing supply and demand for a particular currency; trade; fiscal, money and domestic or foreign exchange control programs and policies; and changes in domestic and foreign interest rates. Investments in foreign markets entail special risks such as currency, political, economic and market risks. The risks of investing in emerging market countries are greater than the risks generally associated with foreign investments. Derivative instruments may disproportionately increase losses and have a significant impact on performance. They also may be subject to counterparty, liquidity, valuation, and correlation and market risks. Restricted and illiquid securities may be more difficult to sell and value than publicly traded securities (liquidity risk). Due to the possibility that prepayments will alter the cash flows on collateralized mortgage obligations (CMOs), it is not possible to determine in advance their final maturity date or average life. In addition, if the collateral securing the CMOs or any third-party guarantees are insufficient to make payments, the portfolio could sustain a loss.

Our fixed income investment capabilities are driven by seven specialized teams – Agency MBS, Broad Markets Fixed Income, Emerging Markets, Floating-Rate Loans, High Yield, Municipals, and Securitized – which span the global fixed income capital markets.
Featured Fund


Basis point: One basis point = 0.01%.


The indexes shown in this report are not meant to depict the performance of any specific investment, and the indexes shown do not include any expenses, fees or sales charges, which would lower performance. The indexes shown are unmanaged and should not be considered an investment. It is not possible to invest directly in an index.

“Bloomberg®” and the Bloomberg Index/Indices used are service marks of Bloomberg Finance L.P. and its affiliates, and have been licensed for use for certain purposes by Morgan Stanley Investment Management (MSIM). Bloomberg is not affiliated with MSIM, does not approve, endorse, review, or recommend any product, and does not guarantee the timeliness, accurateness, or completeness of any data or information relating to any product.

The Bloomberg Euro Aggregate Corporate Index (Bloomberg Euro IG Corporate) is an index designed to reflect the performance of the euro-denominated investment-grade corporate bond market.

The Bloomberg Global Aggregate Corporate Index is the corporate component of the Bloomberg Global Aggregate index, which provides a broad-based measure of the global investment-grade fixed income markets.

The Bloomberg U.S. Corporate High Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. The index excludes emerging market debt.

The Bloomberg U.S. Corporate Index is a broad-based benchmark that measures the investment grade, fixed-rate, taxable, corporate bond market.

The Bloomberg U.S. Mortgage Backed Securities (MBS) Index tracks agency mortgage-backed pass-through securities (both fixed-rate and hybrid ARM) guaranteed by Ginnie Mae (GNMA), Fannie Mae (FNMA) and Freddie Mac (FHLMC). The index is constructed by grouping individual TBA-deliverable MBS pools into aggregates or generics based on program, coupon and vintage. Introduced in 1985, the GNMA, FHLMC and FNMA fixed-rate indexes for 30- and 15-year securities were backdated to January 1976, May 1977 and November 1982, respectively. In April 2007, agency hybrid adjustable-rate mortgage (ARM) pass-through securities were added to the index.

Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care.

Euro vs. USD—Euro total return versus U.S. dollar.

German 10YR bonds – Germany Benchmark 10-Year Datastream Government Index; Japan 10YR government bonds – Japan Benchmark 10-Year Datastream Government Index; and 10YR U.S. Treasury – U.S. Benchmark 10-Year Datastream Government Index.

The ICE BofAML European Currency High-Yield Constrained Index (ICE BofAML Euro HY constrained) is designed to track the performance of euro- and British pound sterling-denominated below investment-grade corporate debt publicly issued in the eurobond, sterling.

The ICE BofAML U.S. Mortgage-Backed Securities (ICE BofAML U.S. Mortgage Master) Index tracks the performance of U.S. dollar-denominated, fixed-rate and hybrid residential mortgage pass-through securities publicly issued by U.S. agencies in the U.S. domestic market.

The ICE BofAML U.S. High Yield Master II Constrained Index (ICE BofAML U.S. High Yield) is a market value-weighted index of all domestic and Yankee high-yield bonds, including deferred-interest bonds and payment-in-kind securities. Its securities have maturities of one year or more and a credit rating lower than BBB-/Baa3, but are not in default.

The ISM Manufacturing Index is based on surveys of more than 300 manufacturing firms by the Institute of Supply Management. The ISM Manufacturing Index monitors employment, production inventories, new orders and supplier deliveries. A composite diffusion index is created that monitors conditions in national manufacturing based on the data from these surveys.

Italy 10-Year Government Bonds – Italy Benchmark 10-Year Datastream Government Index.

The JP Morgan CEMBI Broad Diversified Index is a global, liquid corporate emerging markets benchmark that tracks U.S.-denominated corporate bonds issued by emerging markets entities.

The JPMorgan Government Bond Index – emerging markets (JPM local EM debt) tracks local currency bonds issued by emerging market governments. The index is positioned as the investable benchmark that includes only those countries that are accessible by most of the international investor base (excludes China and India as of September 2013).

The JPMorgan Government Bond Index Emerging Markets (JPM External EM Debt) tracks local currency bonds issued by emerging market governments. The index is positioned as the investable benchmark that includes only those countries that are accessible by most of the international investor base (excludes China and India as of September 2013).

The JP Morgan Emerging Markets Bond Index Global (EMBI Global) tracks total returns for traded external debt instruments in the emerging markets and is an expanded version of the EMBI+. As with the EMBI+, the EMBI Global includes U.S. dollar-denominated Brady bonds, loans and eurobonds with an outstanding face value of at least $500 million.

The JP Morgan GBI-EM Global Diversified Index is a market-capitalization weighted, liquid global benchmark for U.S.-dollar corporate emerging market bonds representing Asia, Latin America, Europe and the Middle East/Africa.

JPY vs. USD – Japanese yen total return versus U.S. dollar.

The Nikkei 225 Index (Japan Nikkei 225) is a price-weighted index of Japan’s top 225 blue-chip companies on the Tokyo Stock Exchange.

The MSCI AC Asia ex-Japan Index (MSCI Asia ex-Japan) captures large- and mid-cap representation across two of three developed markets countries (excluding Japan) and eight emerging markets countries in Asia.

The MSCI All Country World Index (ACWI, MSCI global equities) is a free float-adjusted market capitalization weighted index designed to measure the equity market performance of developed and emerging markets. The term “free float” represents the portion of shares outstanding that are deemed to be available for purchase in the public equity markets by investors. The performance of the Index is listed in U.S. dollars and assumes reinvestment of net dividends.

MSCI Emerging Markets Index (MSCI emerging equities) captures large-and mid-cap representation across 23 emerging markets (EM) countries.

The MSCI World Index (MSCI developed equities) captures large and mid-cap representation across 23 developed market (DM) countries.

Purchasing Managers Index (PMI) is an indicator of the economic health of the manufacturing sector.

The Refinitiv Convertible Global Focus USD Hedged Index is a market weighted index with a minimum size for inclusion of $500 million (U.S.), 200 million (Europe), 22 billion Yen, and $275 million (Other) of Convertible Bonds with an Equity Link.

The Russell 2000® Index is an index that measures the performance of the 2,000 smallest companies in the Russell 3000 Index.

The S&P 500® Index (U.S. S&P 500) measures the performance of the large-cap segment of the U.S. equities market, covering approximately 75 percent of the U.S. equities market. The index includes 500 leading companies in leading industries of the U.S. economy.

S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index seeks to measure the value of residential real estate in 20 major U.S. metropolitan areas: Atlanta, Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Detroit, Las Vegas, Los Angeles, Miami, Minneapolis, New York, Phoenix, Portland, San Diego, San Francisco, Seattle, Tampa and Washington, D.C.

The S&P/LSTA U.S. Leveraged Loan 100 Index (S&P/LSTA Leveraged Loan Index) is designed to reflect the performance of the largest facilities in the leveraged loan market.

The S&P GSCI Copper Index (Copper), a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark for investment performance in the copper commodity market.

The S&P GSCI Softs (GSCI soft commodities) Index is a sub-index of the S&P GSCI that measures the performance of only the soft commodities, weighted on a world production basis. In 2012, the S&P GSCI Softs Index included the following commodities: coffee, sugar, cocoa and cotton.

Spain 10-Year Government Bonds – Spain Benchmark 10-Year Datastream Government Index.

The Thomson Reuters Convertible Global Focus USD Hedged Index is a market weighted index with a minimum size for inclusion of $500 million (U.S.), 200 million euro (Europe), 22 billion yen, and $275 million (Other) of convertible bonds with an equity link.

U.K. 10YR government bonds – U.K. Benchmark 10-Year Datastream Government Index. For the following Datastream government bond indexes, benchmark indexes are based on single bonds. The bond chosen for each series is the most representative bond available for the given maturity band at each point in time. Benchmarks are selected according to the accepted conventions within each market. Generally, the benchmark bond is the latest issue within the given maturity band; consideration is also given to yield, liquidity, issue size and coupon.

The U.S. Dollar Index (DXY) is an index of the value of the United States dollar relative to a basket of foreign currencies, often referred to as a basket of U.S. trade partners’ currencies.

The Chicago Board Options Exchange (CBOE) Market Volatility (VIX) Index shows the market’s expectation of 30-day volatility.

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Italy: MSIM FMIL (Milan Branch), (Sede Secondaria di Milano) Palazzo Serbelloni Corso Venezia, 16 20121 Milano, Italy. The Netherlands: MSIM FMIL (Amsterdam Branch), Rembrandt Tower, 11th Floor Amstelplein 1 1096HA, Netherlands. France: MSIM FMIL (Paris Branch), 61 rue de Monceau 75008 Paris, France. Spain: MSIM FMIL (Madrid Branch), Calle Serrano 55, 28006, Madrid, Spain. Germany: MSIM FMIL (Frankfurt Branch), Niederlassung Deutschland, Grosse Gallusstrasse 18, 60312 Frankfurt am Main, Germany (Gattung: Zweigniederlassung (FDI) gem. § 53b KWG).


Dubai: MSIM Ltd (Representative Office, Unit Precinct 3-7th Floor-Unit 701 and 702, Level 7, Gate Precinct Building 3, Dubai International Financial Centre, Dubai, 506501, United Arab Emirates. Telephone: +97 (0)14 709 7158).



Latin America (Brazil, Chile Colombia, Mexico, Peru, and Uruguay)

This material is for use with an institutional investor or a qualified investor only. All information contained herein is confidential and is for the exclusive use and review of the intended addressee, and may not be passed on to any third party. This material is provided for informational purposes only and does not constitute a public offering, solicitation or recommendation to buy or sell for any product, service, security and/or strategy. A decision to invest should only be made after reading the strategy documentation and conducting in-depth and independent due diligence.


Hong Kong: This material has been issued by Morgan Stanley Asia Limited for use in Hong Kong and shall only be made available to “professional investors” as defined under the Securities and Futures Ordinance of Hong Kong (Cap 571). The contents of this material have not been reviewed nor approved by any regulatory authority including the Securities and Futures Commission in Hong Kong. Accordingly, save where an exemption is available under the relevant law, this material shall not be issued, circulated, distributed, directed at, or made available to, the public in Hong Kong. Singapore: This material may not be circulated or distributed, whether directly or indirectly, to persons in Singapore other than to (i) an accredited investor (ii) an expert investor or (iii) an institutional investor as defined in Section 4A of the Securities and Futures Act, Chapter 289 of Singapore (“SFA”); or (iv) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. This publication has not been reviewed by the Monetary Authority of Singapore. Eaton Vance Management International (Asia) Pte. Ltd. (“EVMIA”) holds a Capital Markets Licence under the Securities and Futures Act of Singapore (“SFA”) to conduct, among others, fund management, is an exempt Financial Adviser pursuant to the Financial Adviser Act Section 23(1)(d) and is regulated by the Monetary Authority of Singapore (“MAS”). Eaton Vance Management, Eaton Vance Management (International) Limited and Parametric Portfolio Associates® LLC holds an exemption under Paragraph 9, 3rd Schedule to the SFA in Singapore to conduct fund management activities under an arrangement with EVMIA and subject to certain conditions. None of the other Eaton Vance group entities or affiliates holds any licences, approvals or authorisations in Singapore to conduct any regulated or licensable activities and nothing in this material shall constitute or be construed as these entities or affiliates holding themselves out to be licensed, approved, authorised or regulated in Singapore, or offering or marketing their services or products. Australia: This publication is disseminated in Australia by Morgan Stanley Investment Management (Australia) Pty Limited ACN: 122040037, AFSL No. 314182, which accept responsibility for its contents. This publication, and any access to it, is intended only for “wholesale clients” within the meaning of the Australian Corporations Act. EVMI is exempt from the requirement to hold an Australian financial services license under the Corporations Act in respect of the provision of financial services to wholesale clients as defined in the Corporations Act 2001 (Cth) and as per the ASIC Corporations (Repeal and Transitional) Instrument 2016/396. Calvert Research and Management, ARBN 635 157 434 is regulated by the U.S. Securities and Exchange Commission under U.S. laws which differ from Australian laws. Calvert Research and Management is exempt from the requirement to hold an Australian financial services licence in accordance with class order 03/1100 in respect of the provision of financial services to wholesale clients in Australia.


For professional investors, this document is circulated or distributed for informational purposes only. For those who are not professional investors, this document is provided in relation to Morgan Stanley Investment Management (Japan) Co., Ltd. (“MSIMJ”)’s business with respect to discretionary investment management agreements (“IMA”) and investment advisory agreements (“IAA”). This is not for the purpose of a recommendation or solicitation of transactions or offers any particular financial instruments. Under an IMA, with respect to management of assets of a client, the client prescribes basic management policies in advance and commissions MSIMJ to make all investment decisions based on an analysis of the value, etc. of the securities, and MSIMJ accepts such commission. The client shall delegate to MSIMJ the authorities necessary for making investment. MSIMJ exercises the delegated authorities based on investment decisions of MSIMJ, and the client shall not make individual instructions. All investment profits and losses belong to the clients; principal is not guaranteed. Please consider the investment objectives and nature of risks before investing. As an investment advisory fee for an IAA or an IMA, the amount of assets subject to the contract multiplied by a certain rate (the upper limit is 2.20% per annum (including tax)) shall be incurred in proportion to the contract period. For some strategies, a contingency fee may be incurred in addition to the fee mentioned above. Indirect charges also may be incurred, such as brokerage commissions for incorporated securities. Since these charges and expenses are different depending on a contract and other factors, MSIMJ cannot present the rates, upper limits, etc. in advance. All clients should read the Documents Provided Prior to the Conclusion of a Contract carefully before executing an agreement. This document is disseminated in Japan by MSIMJ, Registered No. 410 (Director of Kanto Local Finance Bureau (Financial Instruments Firms)), Membership: The Japan Securities Dealers Association, the Investment Trusts Association, Japan, the Japan Investment Advisers Association and the Type II Financial Instruments Firms Association.


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