Q4 2014
Eaton Vance Municipal Market Chart Book
Municipal Market Overview Q4 2014
Q4 2014 Municipal Market Overview • Despite a pick up in interest rate volatility and new issuance, the municipal market generated positive returns, supported by solid fund flows and a decline in treasury yields.
• Within investment grade, longer duration outperformed shorter duration and lower quality outperformed higher quality.
• Municipals underperformed treasuries, sending ratios higher across the curve.
• The municipal curve continued its flattening trend as short term yields rose while longer term yields declined. • Tax-exempt fund flows were positive every week of the quarter indicating consistent demand for the asset class. • An acceleration in refunding deals during the quarter pushed total issuance to $335 billion, on par with 2013’s volume. • Higher tax rates have increased the value of the municipal tax exemption and made municipal yields more attractive on a taxable equivalent basis.
Past performance is no guarantee of future results. It is not possible to invest directly in an index. See end of report for important additional information. This commentary may contain statements that are not historical facts, referred to as "forward looking statements". Actual future results may differ significantly from those stated in any 1 forward-looking statement, depending on factors such as changes in securities or financial markets or general economic conditions.
Municipal Market Overview Q4 2014
Municipal Yield Changes AAA Municipal Yields (%)
• Despite a pick up in interest rate volatility and new issuance, the municipal market generated positive returns, supported by solid fund flows and a decline in treasury yields.
5% 4% 3% 2%
• For the quarter, short term municipal yields rose, while longer term yields declined. 2 yr and 5 yr yields rose 12 bps* and 15 bps, respectively, while 10 yr and 30 yr yields declined 13 bps and 23 bps, respectively.
1% 0% 1 yr
3 yr
5 yr
12/31/2013
• For 2014 overall, 2 yr yields rose 13 bps, while 5, 10 and 30 yr yields declined 2 bps, 77 bps, and 134 bps, respectively.
7 yr
10 yr
9/30/14
20 yr
30 yr
12/31/14
AAA Municipal Yields (%) 5% 4% 3%
• Despite the sharp rally, 10 yr and 30 yr yields remain 57 bps and 39 bps higher than their lowest levels reached in November of 2012.
2% 1% 0% 1 yr
3 yr
5 yr
7 yr
10 yr 11/30/12
Source: Barclays Capital as of 12/31/14 Past performance is no guarantee of future results. It is not possible to invest directly in an index. See end of report for important additional information. *Basis 2 points (BPS) is a unit that is equal to 1/100th of 1% and is used to denote the change in a financial instrument.
20 yr 12/31/14
30 yr
Municipal Market Overview Q4 2014
Index Returns: 2014 vs. 2013 Index Returns QTD & 2014
• Municipal returns were positive across the curve during the quarter.
16%
QTD
15.4%
2014
13.8%
14% 12%
• Within investment grade, longer duration outperformed shorter duration and lower quality outperformed higher quality.
10%
8.7%
8% 6% 3.2%
4%
• High yield underperformed as Puerto Rico credits produced negative returns during the quarter.
• After declining -6.0% in 2013, the Barclays 22+ Year Index returned +15.4% in 2014.
9.1%
2%
2.4%
1.4%
1.4%
1.2%
0.1%
0% 5 yr
10 yr
22+ yr
Barclays Municipal Index
Barclays Municipal HY Index
Index Returns 2013 1%
0.8%
0%
• The Barclays High Yield Municipal Index returned 13.8% following a decline of -5.5% during 2013.
-1% -2% -2.2%
-3%
-2.6%
-4%
• The Barclays 5 Year Index, up slightly in 2013, returned just +3.2% in 2014.
-5% -6%
-5.5% -6.0%
-7% 5 yr
10 yr
22+ yr
Source: Barclays Capital as of 12/31/14 Past performance is no guarantee of future results. Performance less than one year is cumulative. It is not possible to invest directly in an index. See end of report 3 for important additional information.
Barclays Municipal Index
Barclays Municipal HY Index
Municipal Market Overview Q4 2014
Municipal Yield Curve 5-Year / 15-Year Curve
• The dramatic flattening of the muni curve continued this
300
quarter as longer munis outperformed shorter munis.
5-15
- In 2014, the slope of the curve between five and fifteen years declined 115 bps to 101 bps.
200
- Similarly, the slope of the curve between ten and thirty years flattened 57 bps to 82 bps.
100
0 '04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'12
'13
'14
• Despite the flattening, the intermediate and long end of 10-Year / 30-Year Curve
the curve continue to compensate investors in the form of yield pick-up and potential return from bond roll.
300 10-30
• We believe the curve is likely to remain flat or flatten
200
further if the Fed begins to raise short term rates in an environment where inflation is contained.
100
0 '04
'05
'06
'07
'08
Source: Barclays Capital as of 12/31/14 Past performance is no guarantee of future results. It is not possible to invest directly in an index. See end of report for important additional information. Bond roll 4 is the natural appreciation of a bond as it ages by one year, assuming interest rates are unchanged.
'09
'10
'11
Municipal Market Overview Q4 2014
Flows and Issuance • Tapering fears and negative headlines resulted in 32 consecutive weeks and over $60 billion of outflows from tax-exempt mutual funds in 2013.
Muni Mutual Fund Flows
7%
Total Flows
Total Outflows
4
AAA GO 30 yr 3
6%
2
Yield
• During 2014, demand for municipals returned and muni funds flows were positive 44 out of 52 weeks. During Q4, flows were positive every week.
1 4% 0 3% -1 2%
• Overall, for 2014, muni mutual funds received over $20 billion of inflows. • After declining 13% during 2013, new issuance remained low during the first half of 2014. However, an acceleration in refunding deals in the 2nd half pushed total issuance to $335 billion, on par with 2013’s volume.
-2
1%
-3
0%
-4
Municipal Bond Issuance: New vs. Refundings 500 450 400
390
410
Refunding
433
379 335
• This increase reflects an expected pick-up in refunding activity and a slight increase in new money issuance as the economy recovers.
Billions
350
• In a recent survey*, market participants expect total issuance to reach $357.5 billion in 2015.
335
295
300 280
250 200
New
261 208
150 100
151
148
2011
2012
161
144
50 0 2008
Source: Sifma, BofA Merrill Lynch Global Research, Thompson Reuters Municipal Market Data Date Range: October 2007 –December 2014. Flows are the 4-week moving average *SIFMA 2015 Municipal Issuance Survey 5
2009
2010
2013
2014
Flows (Billions)
5%
Municipal Market Overview Q4 2014
Muni-to-Treasury Yield Ratios • Municipals underperformed treasuries, sending ratios higher across the curve during Q4. • As a result, 5, 10, and 30 yr ratios ended the year higher than their 1 yr average ratios of 72%, 90%, and 101%, respectively.
AAA Muni-to-Treasury Yield Ratios (%) 150% 5Y 10Y 30Y 104% 100% 94% 80%
Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14
50%
• With the recent underperformance, value in the five year part of the curve has improved modestly.
How Attractive Are Muni/Treasury Ratios vs. 10 Year History
• Over the last 10 years, the 5 yr muni/Treasury ratio has been cheaper 51% of the time compared to the current level.
Ratios Have Been Higher 100% 80%
• In contrast, at current levels, the 10 and 30 year ratios are attractive as they have been higher only 34% and 31% of the time, respectively.
Ratios Have Been Lower
34%
31%
66%
69%
10Y
30Y
51%
60% 40% 20%
49%
0%
5Y Source: Barclays Capital as of 12/31/14 Past performance is no guarantee of future results. It is not possible to invest directly in an index. See end of report for important additional information. 6
Municipal Market Overview Q4 2014
State Fundamentals Improving & Municipal Defaults Down Debt, Pension and OPEB Liabilities as a % of GDP
• Many states have curtailed borrowing after the Great Recession. Combined with increasing state GDP, this has resulted in state debt (as a % of GDP) remaining low. • When including pension and OPEB liabilities, most states maintain manageable burdens, and the State median has declined from 11.5% in 2011 to 10.8% in 2013.
45% OPEB Liabilities
40% 35%
State Share of Adjusted Unfunded Pension Liability
30%
Debt
25% 20% 15%
State Median = 10.8%
10%
0%
• For the year, municipal defaults decreased as there were 57 first time payment defaults compared to 68 in 2013.
Nebraska Iowa South… Idaho Florida Nevada Arizona Utah Wyoming Montana Wiscon… Tennes… Oregon North… Virginia New… Missouri Arkansas Colorado Washin… Indiana North… Georgia Alabama Ohio New York Texas Michigan Minnes… New… South… California Oklaho… Pennsy… Kansas Mississ… Rhode… Vermont Maryland Maine Delaware West… Kentucky Louisiana Massa… New… Illinois Alaska Conne… Hawaii
5%
Cumulative Number of Issuer Defaults 135 120
• In 2014, $1.15 bn in total outstanding par value entered into debt service payment default for the first time, compared to approximately $2.6 bn in 2013.*
105 90 75 60
• Heading into 2015, this downward trend should continue as the economy improves, tax collections increase and the number of vulnerable projects decreases.
45 30 15 0 Jan
Feb March April 2011
Source: Municipal Market Advisors: 12/31/14. *BofA ML 12/5/14. Moody’s May ’14, State CAFRs 6/30/13, Bureau of Economic Analysis 2013. See end of report for important additional information. 7
May
Jun
2012
Jul 2013
Aug Sep 2014
Oct
Nov
Dec
Municipal Market Overview Q4 2014
Higher Tax Rates Taxable Equivalent Yields
• Tax rates for the highest income earners have risen by nearly 30% since 2013 due to increases in ordinary and investment income taxes, the new health care surtax and reinstated limitations. • Including the impact of state income taxes, the effective tax rate for some investors may be in the 50% range.
14% 12% 10% 8% 6% 4% 2% 0%
Tax Adjusted Yield
S&P/LSTA Leveraged Loan Index
6.60%
6.02%
5.42%
5%
• As of year end, the Barclays Muni Index yielded 2.09%. With the new maximum rate of 43.4%, which includes the Medicare surtax, the taxableequivalent yield jumps to 3.69%.
2%
Tax Adjusted Yield
4.812
Nominal Yield 3.69%
4% 3%
6.40%
JPMorgan Corp Barclays Capital US Barclays Capital HY Emerging Markets Corp HY Index Municipal Bond Bond Index Plus Index
Taxable Equivalent Yields
• Tax-exempt income from municipal bonds may have become more attractive to investors as a result of the increased tax rates.
11.31%
Nominal Yield
3.11% 2.09%
2.25%
1% 0%
Barclays Capital US Agg Index
Baclays US IG Corporate Barclays Capital Municipal Bond Index
Source: Barclays Capital as of 12/31/14 Source: Tax Policy Center. This table is for illustrative purposes only and uses the highest current applicable federal tax rates plus new 3.8% health care tax where 8 applicable. Past performance is no guarantee of future results. It is not possible to invest directly in an index. See end of report for important additional information.
Municipal Market Overview Q4 2014
Municipal Market Outlook • Municipals ended the year attractively valued relative to treasuries which may result in outperformance during the typically favorable technical environment of January and February. • We continue to like intermediate and longer maturities and believe the curve could potentially flatten further if the Fed raises short term rates in an environment where inflation is contained. • While a pick-up in new issuance is likely in 2015, we believe demand for munis will continue to be firm as higher tax-rates have increased the attractiveness of municipals relative to taxable alternatives. • Though Congress and the Administration will debate tax reform, the focus will likely be on corporate tax reform. As a result, individual tax rates will remain high and a significant challenge to the municipal tax exemption is unlikely. • As the economy recovers and state tax receipts increase, municipal credit quality will continue to improve and defaults should continue to be isolated. • Key risks to remain aware of are a likely restructuring of Puerto Rico Electrical Power Authority bonds during the first quarter and a possible increase in interest rate volatility as we approach the beginning of the Fed’s tightening cycle.
9
Municipal Market Overview Q4 2014
Investing with a Leader in Municipal Bonds •
Eaton Vance is a premier municipal bond manager - Among the largest and deepest municipal investment teams in the U.S. - 28 dedicated municipal investment professionals* - Consistent, bottom-up investment process and proven track record - Marketplace significance: $26.6 billion in municipal bond strategies*
•
One of the broadest selections of muni solutions - Mutual funds, closed-end funds and separate accounts - Customizable solutions engineered for special investment situations
•
10
Legacy of managing for tax-exempt income and total return
*As of 9/30/2014 includes all mutual funds, SMA’s and advisory products.
Municipal Market Overview Q4 2014
Eaton Vance Municipal Income Investment Team Investment Team with Extensive Experience Municipal Bond Team Team Leadership Craig Brandon, CFA Co-Director of Municipal Investments Senior Portfolio Manager 20 Years Experience (16 with EV)
Cynthia Clemson Co-Director of Municipal Investments Senior Portfolio Manager 29 Years Experience (29 with EV)
Thomas Metzold, CFA Senior Portfolio Advisor Senior Portfolio Manager 28 Years Experience (28 with EV)
Portfolio Manager Adam Weigold, CFA Senior Portfolio Manager 17 Years Experience (16 with EV)
Trading Deborah Trachtenberg Director of Municipal Trading 40 Years Experience (17 with EV)
Simone Santiago Senior Trader 17 Years Experience (16 with EV)
Institutional Portfolio Specialist Michael Sullivan, CFA Institutional Portfolio Manager 15 Yrs Experience (1 with EV)
11
Eaton Vance, as of 12/31/14
Portfolio Associates and Assistants Christopher Berry Senior Municipal Trader 22 Years Experience (13 with EV)
John Khodarahmi Senior Municipal Trader 25 Years Experience (12 with EV)
Chris Eustance, CFA 9 Years Experience (7 with EV)
Jessica Hemenway 9 Years Experience (5 with EV)
Alexander Martland 5 Years Experience (5 with EV)
Jeff Sayman Portfolio Assistant 2 Years Experience (2 with EV)
Municipal Market Overview Q4 2014
Eaton Vance Tax-Advantaged Bond Strategies Team Investment Team with Extensive Experience TABS Team Team Leadership Jim Evans, CFA Director Tax Advantaged Bond Strategies 32 Yrs Experience (25 with EV)
Separately Managed Account (SMA) Portfolio Managers
Institutional Portfolio and Traders
Jonathon Rocafort Co-Director SMA Strategies 12 Yrs Experience (11 with EV)
Brian Barney, CFA Director Institutional Portfolio Strategies 14 Yrs Experience (14 with EV)
Issac Kuo, CFA, CPA Co-Director SMA Strategies 12 Years Experience (5 with EV)
Devin Cooch, CFA Portfolio Manager 7 Yrs Experience (7 with EV)
Dan Cozzi Portfolio Manager 11 Yrs Experience (1 with EV)
Joseph Davolio Portfolio Manager 13 Yrs Experience (9 with EV)
Chris Harshman, CFA Portfolio Manager 12 Yrs Experience (6 with EV)
Nisha Patel, CFA Portfolio Manager 10 Yrs Experience (9 with EV)
Evan Rourke, CFA Portfolio Manager 28 Yrs Experience (8 with EV)
Institutional Portfolio Specialist Michael Sullivan, CFA Institutional Portfolio Manager 15 Yrs Experience (1 with EV)
12
Eaton Vance, as of 12/31/14
Lauren Kashmanian Portfolio Manager 7 Yrs Experience (7 with EV)
Steve Wool Portfolio Manager 32 Yrs Experience (1 with EV)
Municipal Market Overview Q4 2014
Eaton Vance Municipal Credit Research Team Credit Research Team with Extensive Experience Municipal Credit Research Team Bill Delahunty, CFA Director of Municipal Credit Research Hospitals, Long Term Care, Corporate 21 Years Experience (17 with EV)
Lilly Scher Senior Analyst Hospitals, Education 28 Years Experience (15 with EV)
Leanne Parziale, CFA Senior Analyst Tobacco, Multi-Family Housing 20 Years Experience (18 with EV)
Marc Savaria Senior Analyst Education, General Obligations, Investor Owned Utilities 19 Years Experience (4 with EV)
Megan Poplowski Senior Analyst Hospitals, Education, Real Estate, Toll Roads, Bond Insurers 19 Years Experience (7 with EV)
Henry Hong, CFA Senior Analyst Airports, Corporate, Gaming, Real Estate, Public Power 18 Years Experience (9 with EV)
Trevor Smith Senior Analyst General Obligations, Special Tax, Puerto Rico, Ports 9 Years Experience (5 with EV)
Raya McAnern Analyst Financial Institutions, General Obligations 15 Years Experience (7 with EV)
Colin Shaw Analyst General Obligations, Essential Service Rev., Health Care 7 Years Experience (6 with EV)
Kate Santangelo, CFA Analyst Water & Sewer, General Obligations, Special Tax 10 Years Experience (10 with EV)
Brian Hassler, CFA Analyst Water & Sewer, General Obligations, Special Tax 8 Years Experience (8 with EV)
Jonathan Souza Associate Analyst General Obligations, Housing, Dedicated Tax Bonds and Water & Sewer 7 Years Experience (7 with EV)
Caroline Fedora Associate Analyst General Obligations, Essential Service Rev., Special Tax 5 Years Experience (4 with EV)
Carl Thompson Associate Analyst General Obligations, Housing, Student Loans, Dedicated Tax Bonds and Water & Sewer 4 Years Experience (4 with EV)
Patrick Keogh Research Associate 4 Years Experience (1 with EV)
13
Eaton Vance, as of 12/31/14
Municipal Market Overview Q4 2014
Eaton Vance Municipal Investment Process Team-oriented, research-based process with qualitative and quantitative overlays The Opportunity
The Process
The Result
Credit Research
$3.7 Trillion Municipal Market
Broad Municipal Product Offerings
Relative Value Investing
Market Surveillance • •
Internal risk rating
•
Investment universe
•
•
14
Issuer relative ranking Issuer specific fundamental analysis Relative value rankings within industries
Bottom-up Analysis and Selection
•
Market valuation
•
Relative industry valuations
•
Technical analysis
•
Determine liquidity and price trends
•
Fundamental trends
•
Bottom-up industry review
•
Collaborative decision making
•
Portfolio managers
•
Credit analysts
•
Traders
•
Risk management
•
Portfolio
•
Product specific guidelines
•
Credit names
•
Best portfolio within guidelines
Municipal Market Overview Q4 2014
Important Information & Disclosure INDEX DEFINITIONS: Barclays Capital Global Aggregate Ex-USD Index is a broad-based measure of global investment grade fixed-rate debt investments, excluding USD-denominated debt. Barclays Capital Municipal Bond Index is an unmanaged index of municipal bonds traded in the U.S. Barclays Capital U.S. Aggregate Index is an unmanaged index of domestic investment-grade bonds, including corporate, government and mortgage-backed securities. Barclays Capital U.S. Corporate High Yield Index measures USD-denominated, non-investment grade corporate securities. Barclays Capital U.S. Corporate Index is an unmanaged index that measures the performance of investment-grade corporate securities within the Barclays Capital U.S. Aggregate Index. JPMorgan Emerging Markets Bond Index Plus (EMBI+) is a market-cap weighted index that measures USD-denominated Brady Bonds, Eurobonds, and traded loans issued by sovereigns. S&P/LSTA Leveraged Loan Index is an unmanaged index of the institutional leveraged loan market. Terms: Municipal-to-Treasury Yield Ratios are relative value indicators that measure the richness or cheapness of Municipal bond yields to comparable maturity Treasury bond yields. Yield to Worst is a measure which reflects the lowest potential yield earned on a bond without the issuer defaulting. The yield to worst is calculated by making worst-case scenario assumptions by calculating the returns that would be received if provisions, including prepayment, call or sinking fund, are used by the issuer.
15
Debt, Pension and OPEB Liabilities as a % of GDP Debt is net tax supported debt from Moody’s May 2014. Unfunded pension liabilities from State CAFRs as of June 30, 2013. States’ share of estimated pension liabilities are based upon the states’ share of the total state and local liabilities as per Moody’s “US State Pension Medians Increase in Fiscal 2012” (January 2014) and Eaton Vance assumptions. GDP from the Bureau of Economic Analysis 2013 advanced estimates. State’s pension plan discount rates from 2013 State CAFRs. Eaton Vance then applied a 5.5% discount rate to pension liabilities, based on Moody’s Adjustments to US State and Local Government Reported Pension Data, July 2, 2012, where for each 1% difference between 5.5% and a plan’s discount rate, the actuarial accrued liability increased by 13%. OPEB liabilities from State CAFRs. Importantly, the states’ unfunded OPEB liability has not been adjusted for the states’ share of the total state and local OPEB liability, which could result in the states’ OPEB liability being overstated.
Municipal Market Overview Q4 2014
Important Information & Disclosure This presentation is for informational and illustrative purposes only. This material does not constitute investment advice and should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell any particular securities or to adopt any investment strategy. This information has been prepared on the basis of publicly available information, internally developed data and other third party sources believed to be reliable. However, no assurances are provided regarding the reliability of such information and Eaton Vance has not sought to independently verify information taken from public and third party sources. Any investment views and market opinions/analyses expressed constitute judgments as of the date of this presentation and are subject to change at any time without notice. Different views may be expressed based on different investment styles, objectives, views or philosophies. Each managed product is individually managed and may differ significantly from the information discussed in terms of portfolio holdings, characteristics and performance. It should not be assumed that any investments in securities, companies, sectors or markets described were or will be profitable. It should not be assumed that any managed product will have an investment experience similar to any returns shown or to any previous or existing managed product. There are no guarantees concerning the achievement of investment objectives, allocations, target returns or measurements such as alpha, tracking error, stock weightings and information ratios. The use of tools cannot guarantee performance. There is no assurance that any portfolio characteristics, holdings, sectors or securities mentioned are currently held in a managed product or will remain in a managed product at the time you receive this report or that securities have not been sold or repurchased. The specific securities mentioned are not representative of all the securities purchased, sold or recommended for managed products. It should not be assumed that any of the securities were or will be profitable, or that any recommendations in the future will be profitable or will equal the performance of the listed securities. Not all of Eaton Vance’s recommendations have been or will be profitable. Actual holdings will vary for each managed product, and there is no guarantee that a particular managed product will hold any, or all, or the securities identified. The views and strategies described may not be suitable for all investors. Not all of Eaton Vance’s recommendations have been or will be profitable. Hypothetical scenarios, blended portfolios, forecasts and estimates and certain information contained herein are based, in part, upon proprietary research and the experience of Eaton Vance, and are not to be relied upon as advice or interpreted as a recommendation. The information does not reflect the experience or holdings of a managed product. Hypothetical scenarios, blended portfolios, forecasts and estimates have certain inherent limitations and do not reflect actual trading, liquidity constraints, fees and other costs. In addition, references to future yield/returns should not be construed as an estimate or promise of the results a managed product may achieve. Information may not reflect the impact that material economic and market factors might have had on Eaton Vance’s decision-making. Any references to future returns should not be construed as an estimate or promise of the results a managed product may achieve. Actual portfolio holdings will vary for each managed product. The returns experienced by a particular managed product will be different from those included in this presentation. This presentation may include statements that are not historical facts, referred to as forwardlooking statements. Future results may differ significantly from those stated in forward-looking statements, depending on factors such as changes in securities or financial markets or general economic conditions. Unless otherwise stated, index returns do not reflect the effect of any applicable sales charges, commissions, fees, expenses, taxes or leverage, as applicable. It is not possible to directly invest in an index or the hypothetical blended portfolios as constructed by Eaton Vance. Past performance does not predict future results. Investing entails risk and there can be no assurance that Eaton Vance, or its affiliates, will achieve profits or avoid incurring losses.
16
Municipal Market Overview Q4 2014
Important Information & 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. 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.
17
Municipal Market Overview Q4 2014
For More Information Mutual Funds are distributed by Eaton Vance Distributors, Inc. Two International Place, Boston, MA 02110, (800) 225-6265. Member FINRA/ SIPC. Before investing, investors should consider carefully the investment objectives, risks, charges and expenses of a mutual fund. This and other important information is contained in the prospectus and summary prospectus, which can be obtained from a financial advisor. Prospective investors should read the prospectus carefully before investing. Eaton Vance Management (EVM) is an investment advisor with its headquarters located at Two International Place, Boston, MA 02110. This material is for illustrative and informational purposes only and should not be considered investment advice, a recommendation to purchase or sell any particular securities or to adopt any particular investment strategy. Investing entails risks and there can be no assurance that EVM or its affiliates will achieve profits or avoid incurring losses. Notice to UK Investors: Eaton Vance Management (International) Limited is authorised and regulated in the United Kingdom by the Financial Services Authority. Eaton Vance Management (International) Limited, 125 Old Broad Street, London, EC2N 1AR, United Kingdom and assumes responsibility for this material. ©2014 Eaton Vance Distributors, Inc. www.eatonvance.com
Not FDIC Insured • Not Bank Guaranteed • May Lose Value 18
15337 1.12.15