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How I Stopped Worrying and Learned to Love the Bond…
and More of My Favorite Themes for 2014
Jeffrey Rosenberg
Chief Investment Strategist for Fixed Income
December 2014
• How I Stopped Worrying and Learned to Love the Bond
• Dude, Where’s My Duration?
• Shorten your duration, but don’t own Short Duration
• Promises, Promises… Why do I believe?
• Balancing Credit and Interest Rate Risk
• What’s in Your Model?
• “Won’t Get Fooled Again”
• You Can Lead a Horse to Liquidity…But You Can’t Make Him Borrow
• “Like a Rolling Loan”
• The Dukes of Moral Hazard
• The Five Stages of Greece
My Favorite Themes
2
Investment Themes and Recommendations
Themes Recommendations
How I stopped worrying
and learned to love the
bond
Promises, promises…
Why do I believe?
Treasury / Agency: “Low for longer" may be shorter than the market expects – that means big
shifts in rates led by the front end of the yield curve, leading to our underweight for short treasuries.
Inflation Protected: Although we only expect a modest increase in inflation, longer maturity TIPS
show better value and we favor duration hedged TIPS exposure in longer maturities.
Municipals: With ratios greater than 100% and fears of systemic risk from Puerto Rico declining,
many bonds look attractive, particularly in the longer maturity buckets (10+ years).
Shorten your duration,
but don't own Short D
Bank Loans: If the economy outperforms, “low for longer” will be limited to ultra-short strategies (<
2yrs) leaving the 2-5 year segment (incl. bank loans) exposed to the failures of forward guidance.
Balancing credit and
interest rate risk
High Yield: Ample global liquidity continues to defer the credit cycle. However, relatively low yields,
greater liquidity risk and limited upside lead us towards a more tactical allocation to high yield.
Agency Mortgages: An improved outlook with tapering risks generally behind us, attractive
spreads relative to higher quality IG corporates, and high liquidity creating better portfolio flexibility.
Corporates: Tight spreads, rising credit risk and expensive valuations relative to other investment
opportunities shift our allocation here to underweight.
Securitized Assets: Fed policy continues to benefit housing, underwriting its recovery, but a more
selective approach is warranted as prices have recovered and are skewed to the downside.
What's in your model? Stocks beat bonds again in 2014 as global policy accommodation, though slowing in the US, still
supports asset inflation where stocks have greater room to appreciate and bonds look vulnerable.
Why nations fail
Non-USD: Tapering signals a shift in US monetary policy and dollar appreciation undermines non-
USD fixed income. Peripherals have approached full valuation.
EM: EM has a bifurcated outlook as flows could be challenged with dollar strength from Fed
normalization while some areas of EM adequately compensate for the risk.
3
How I Stopped Worrying and Learned to Love the Bond
Steepening Yield Curve in 2013….Flattening in 2014
Source: Bloomberg.
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
3 Year Treasury 30 Year Treasury
4
Yield Curve Flattens as the Fed Moves to Tighten
2s/10s Curve vs. the Fed Funds Rate
Source: Bloomberg.
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
-100
-50
0
50
100
150
200
250
300
350
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Fed
Fu
nd
s T
arg
et
Rate
(%
)
2s10s C
urv
e (
bp
s)
2s/10s Curve Fed Funds Target Rate
5
Fed Forward Guidance Guides Market Pricing
Promises, Promises… Why do I believe?
Source: J.P. Morgan, Federal Reserve.
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
2014 2015 2016 2017 2018 2019 2020 2021 2022
Yie
ld (
%)
Fed's Median Target Fed Funds Rate (Jun.) Fed's Median Target Fed Funds Rate (Sept.)
Fed's Longer Run Target Fed Funds Rate (Sept.) Forward OIS Rate
6
Summertime and the Central Banks are Easy
Mismatch between potential policy rate paths and market expectations
Source: J.P. Morgan, Federal Reserve Bank of Philadelphia, Federal Reserve. Market data as of 11/6/2014.
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
Dec-14 Dec-15 Dec-16 Dec-17
Fed
Fu
nd
s R
ate
Path
Current Market Pricing of Future Fed Funds Rate
Median of FOMC dots
Mean of Monetary Policy Rules
7
The Flows Follow the Returns
Cumulative Fixed Income Flows
Source: Morningstar, EM flows from EPFR.
-25
-20
-15
-10
-5
0
5
10
15
20
25
-200
-150
-100
-50
0
50
100
150
200
2014 F
low
s (
$ in
bn
)
2013 F
low
s (
$ in
bn
)
2013 2014 YTD
8
Out of the Frying Pan, Into the Fire
The March and October FOMC Market Reaction Illustrated the Risks to Shorter Maturity Yields
Source: Bloomberg.
-10
-5
0
5
10
15
20
0 5 10 15 20 25 30
Ch
an
ge (
bp
s)
March FOMC October FOMC
9
Duration Contributions by Fixed Income Sectors
Source: Barclays, JP Morgan, BlackRock. Data labels show total modified duration.
Dude, Where’s My Duration?
1.9
2.5
4.4
4.1
5.3 7.0
5.6 6.8 5.0
7.1
7.1 7.2
10.3
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Du
rati
on
Co
ntr
ibu
tio
n a
s %
of
To
tal D
ura
tio
n b
y
Cu
rve S
en
sit
ivit
y
Short Duration Long Duration
10
-2.00
-1.50
-1.00
-0.50
0.00
0.50
1.00
1.50
2.00
Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14
Yie
ld (
%)
Inflation Expectations
Real 5Y Rate
Nominal 5Y Rate
Real Rates and Inflation Expectations
Source: Bloomberg.
Two Kinds of Duration
11
Won’t Get Fooled Again
Treasury yield vs. Inflation
Source: Bloomberg; Realized inflation represented by CPI Urban Consumers % change year over year.
-4
-2
0
2
4
6
8
10
12
14
16
18
1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013
Ra
te (
%)
10 Year Treasury Yield Realized Inflation
12
What is Normal?
Real Fed Funds vs. Recessions
Source: Bloomberg; Realized inflation represented by Core CPI Urban Consumers % change year over year.
-8.00
-6.00
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00
10.00
Real
Fe
d F
un
ds R
ate
NBER Recession
13
From Highly Accommodative to (Merely) Accommodative
Real Fed Funds Historical Distribution
Source: Bloomberg; Realized inflation represented by Core CPI Urban Consumers % change year over year.
0%
5%
10%
15%
20%
25%
< -2% -2% -1% 0% 1% 2% 3% 4% > 5%
Real
Fed
Fu
nd
s R
ate
Dis
trib
uti
on
Real Fed Funds Rate (%)
Accommodative Highly
Accommodative
Neutral Tight
14
You Can Lead a Horse to Liquidity…
Global central bank total assets
Source: Federal Reserve, ECB, PBOC, BOJ, Bloomberg.
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
$ t
rill
ion
s
PBOC ECB Federal Reserve BOJ
15
But You Can’t Make Him Borrow
Mortgages and Consumer Loan Growth
Source: New York Fed - Household Debt and Credit Report.
YoY Growth
All Mortgages Auto Loan Credit Card Student Loan
As of Q2 2014 2.82% 11.18% 0.15% 12.47%
-10%
-5%
0%
5%
10%
15%
20%
25%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Yo
Y G
row
th R
ate
Mortgages Consumer Loans
16
Zero Interest Rates Subsidizes the Debtor
Consumer Balance Sheet Repair
Source: Federal Reserve, BEA.
70
80
90
100
110
120
130
140
8
9
10
11
12
13
14
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Ho
useh
old
Lev
era
ge R
ati
o (
Ho
useh
old
Deb
t /
Pers
on
al
Dis
po
sab
le I
nco
me,
%)
Deb
t S
erv
ice R
ati
o (
%)
Debt Service Ratio Household Leverage Ratio (RHS)
17
The Fed’s Absolution (for Original Sin)
US Wealth vs. Savings Rate
Source: Federal Reserve, BEA.
0
2
4
6
8
10
12
14
16
400
450
500
550
600
650
700
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012
Sav
ing
s R
ate
(%
)
Ho
useh
old
Net
Wo
rth
as a
% o
f P
ers
on
al
Dis
po
sab
le I
nco
me
Household Net Worth as a % of Personal Disposable Income Savings Rate (RHS)
18
Income Growth Stabilizes… But Will It Grow?
A Recovery Without Income
Source: US Census, Bureau of Labor Statistics.
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
45,000
47,000
49,000
51,000
53,000
55,000
57,000
1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Av
era
ge H
ou
rly E
arn
ing
s Y
oY
Gro
wth
(%
)
Med
ian
An
nu
al
Inco
me (
2013 D
ollars
)
Median Household Income (2013 dollars)
AHE YoY Growth of Production and Nonsupervisory Employees (RHS)
AHE YoY Growth of All Private Employees (RHS)
19
The Wages of Fear
Forward Looking Measures of Wages Suggest Increases
Source: NFIB, BLS.
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
0
5
10
15
20
25
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
EC
I Y
oY
Ch
an
ge (
%)
% o
f F
irm
s S
urv
eyed
NFIB: Companies Planning to Raise Compensation (9M Lead)
ECI: Wages and Salaries: Private Industry Workers (RHS)
20
The Monetary Policy Rorschach Test
Short Term Unemployment Improves, While Long Term Continues to Lag
Source: Deutsche Bank, Bureau of Labor Statistics, Congressional Budget Office.
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
76 80 84 88 92 96 00 04 08 12
%
ST Unemployment Gap LT Unemployment Gap
21
It’s Hard to Get Good Policy Advice These Days…
Evolution in the Estimated Degree of Cyclical Decline in the Labor Force Participation Rate
Source: Council of Economic Advisors, BlackRock estimates from papers listed above.
Author Pub. Date Time Period Structural –
Trend
Structural –
Other Cyclical
Sherk (Heritage Foundation) Sep. 2014 2007 - 2013 40% 30% 30%
Aaronson, Cajner, Fallick, Galbis-Reig,
Smith and Wascher (Fed) Sep. 2014 2007 Q4 - 2014 Q2 45% 32% 23%
Council of Economic Advisors Jul. 2014 2007 Q4 - 2014 Q2 52% 32% 16%
Fujita (Philly Fed) Q1 2014 2007 Q4 - 2014 Q1 45% 39% 15%
Congressional Budget Office Feb. 2014 2007 Q4 - 2013 Q4 50% 17% 33%
Fallick & Pingle (Richmond Fed) Sep. 2013 2007 Q4 - 2013 Q2 75% 9% 16%
Bengali, Daly and Valleta (SF Fed) May 2013 2007 - 2013 Q1 -- -- Significant
Erceg and Levin (IMF) Apr. 2013 2007 - 2012 25% 15% 60%
Hotchkiss and Rios-Avila (Atlanta Fed) Mar. 2013 2007 - 2012 -- -- 100%
Kudlyak (Richmond Fed) Mar. 2013 2007 - 2012 80% -- 20%
Sherk (Heritage Foundation) Aug. 2012 2007 - 2011 20% 30% 50%
Shierholz (EPI) May 2012 2007 - 2011 33% -- 66%
Van Zandweghe (Kansas City Fed) Mar. 2012 2007 - 2011 42% -- 58%
22
Encouraging Discouragement
Labor Force Participation Rate Decomposition
Source: BlackRock, Bureau of Labor Statistics; Census Bureau; Fujita 2014 “Constructing the Reason-for-Nonparticipation Variable Using the Monthly CPS”.
-3.5%
-3.0%
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13
Dec
lin
e in
Pa
rtic
ipa
tio
n R
ate
-- Retirement (1.50%)
-- Disability (0.70%)
-- Discouragement (0.45%)
-- School Enrollment (0.45%)
-- No desire for job (0.10%)
3.2% decline in LFPR
from Dec-2007 to July-2014
23
Structural vs. Cyclical Unemployment
Skills Mismatches Indicate Tight Labor Markets and Structural Headwinds
Source: NFIB.
0
5
10
15
20
25
30
35
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
NF
IB S
ing
le M
ost
Imp
ort
an
t P
rob
lem
(%
of
Resp
on
den
ts)
Poor Sales Quality of Labor
24
Repricing Liquidity Risk
Tactical Opportunities in High Yield and Loans
Source: Barclays, S&P LCD. HY yields represented by the Barclays US Corporate HY Index.
96.0
96.5
97.0
97.5
98.0
98.5
99.0
99.5
100
101
102
103
104
105
106
107
Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14
Lo
an
Pri
ce
Hig
h Y
ield
Pri
ce
HY Price Loan Price (RHS)
25
Shorten your duration, but don’t own Short Duration
Short Duration Bond Fund Yields vs. 2yr Treasury in 1 year
Source: Bloomberg, Short Investment Grade Debt Fund yields provided by Lipper Data SEC yields.
Past performance is no guarantee of future results.
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Yie
ld (
%)
Short Invt. Grade Debt Fund 2yr Yield in 1 Year
QE1 QE2 Operation Twist through
May 22nd Taper Comment
26
And Know What You Own
High Yield vs. Loans
Source: Barclays High Yield Index, S&P Leveraged Loan Index.
4.5
5.5
6.5
7.5
8.5
9.5
10.5
HY Yield Loans Yield
27
One Pill Makes You Larger
QE Programs Compared to GDP
Source: Bloomberg, BlackRock.
5%
15%
25%
35%
45%
55%
65%
75%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
% o
f G
DP
Fed BOJ (Current) ECB (BlackRock estimates)
28
The Five Stages of Greece…(and Europe and the US)…
Source: Reinhart and Sbrancia 2011. “The Liquidation of Government Debt” NBER Working Paper 16893, March.
Historical Debt/GDP Ratio
29
“This Is It”
ECB Continues to Support Peripheral Bond Spread Tightening
Source: Bloomberg.
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Yie
ld (
%)
Spanish 3 Year Yields Italian 3 Year Yields
"Believe me, it will be enough"
30
Divergence in Economic Performance…
Manufacturing Surveys Have Indicated Strength in US and Weakness in Europe
Source: Bloomberg.
45
47
49
51
53
55
57
59
61
PM
I L
ev
el
US ISM Eurozone Manf. PMI
31
… Leads to Divergence in Financial Markets
Widening of US / EU Interest Rate Differential Coincides with Euro Weakness
Source: Bloomberg.
1.15
1.20
1.25
1.30
1.35
1.40
1.45
0
10
20
30
40
50
60
70
EU
RU
SD
Sp
read
(b
ps)
US - Germany 2 Year Spread Euro
32
Not All Central Banks Are Created Equal
The Exorbitant Privilege – The Fed Matters More
International
Reserves1
Currency
Turnover2
Exchange
Rate Regime3
Debt
Securities
Outstanding4
Global Source
of Yield5
Non-govt.
Debt
Outstanding6
Dollar 60.9% 87.0% 42.4% 40.6% 56.9% 70.6%
Euro 24.5% 33.4% 18.2% 24.7% 14.2% 19.9%
Pound 4.0% 11.8% 3.4% 6.4% 7.8% 4.3%
Yen 3.9% 23.0% 6.6% 13.5% 3.8% 1.2%
Other 6.8% 44.8% 29.4% 14.7% 17.3% 4.0%
1. Allocated official FX reserves. As of year end 2013. Source: IMF.
2. Share of average daily turnover of OTC transactions incl. derivatives in April 2013. Because two currencies are involved in each transaction, the sum of the percentage
shares totals 200% instead of 100% Source: BIS.
3. Effective exchange rate anchors as a share of GDP. Excludes economies tied to composite exchange rate anchors. Source: IMF.
4. Debt securities by residence of issuer, not by currency of issue. Source: BIS.
5. Represents the share of yield in fixed income by currency. Source: Barclays Multiverse Index.
6. Source: Barclays Multiverse Corporate and Securitized Indices.
33
0
20
40
60
80
100
120
140
160
-3
-2
-1
0
1
2
3
4
5
Bre
nt
Cru
de O
il (
$)
5 Y
ear
Real
Yie
lds
5 Year Real Yields Brent Crude Oil (RHS) Gold (RHS 2)
Real Yields Matter for All Currencies
Real Yields, Oil and Gold
Source: Bloomberg.
34
Return to Achnacarry Castle
US Dollar vs . Brent Crude Oil Prices
Source: Bloomberg, Federal Reserve.
65
70
75
80
85
90
0
20
40
60
80
100
120
140
160
2007 2008 2009 2010 2011 2012 2013 2014
Tra
de W
eig
hte
d D
ollar
Ind
ex
Oil P
rice
Brent Oil Price USTW$ Index (R)
35
European Peripherals: Benefits from an Easing ECB Mostly Priced In
ECB Policy Objective – Convergence Benchmark Curves: Bull Flattening in 2014
Source: Bloomberg.
2s/5s
(bps) YTD Δ
2s/10s
(bps) YTD Δ
Spain 57 -60 166 -94
Italy 50 -94 170 -108
Portugal 107 -20 243 -13
Slovenia 78 -79 178 -72
Curves as of 11/7/2014. 0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
Yie
ld (
%)
Spain Italy Germany France Portugal
36
Synthetic Spread Divergence Cash Bond Spread Divergence
Source: Barclays, J.P. Morgan, Bloomberg.
Note: The EMBIG Diversified IG Index contains 80% BBB rated countries by market value.
Why Nations Fail: EM Performance Divergence
80
130
180
230
280
330
380
430
55
65
75
85
95
105
115
No
v-1
2
Jan-1
3
Ma
r-1
3
Ma
y-1
3
Jul-1
3
Sep-1
3
No
v-1
3
Jan-1
4
Ma
r-1
4
Ma
y-1
4
Jul-1
4
Sep-1
4
No
v-1
4
EM
CD
X S
pre
ad
s (
bp
s)
IG C
DX
Sp
read
s (
bp
s)
IG CDX EM CDX (RHS)
-120
-100
-80
-60
-40
-20
0
20
40
60
80
100
Sp
read
(b
ps)
EM IG Spread - Global Agg BBB Spread
37
What’s in Your Model?
Correlation Shift in Summer 2013 Corresponded to Rate Uncertainty
Source: BAML MOVE Index, Barclays, Bloomberg.
0
20
40
60
80
100
120
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
Inte
rest
Rate
Vo
lati
lity
(b
ps)
Ro
llin
g 2
0 D
ay C
orr
ela
tio
n
Rate and Equity Return Correlation Interest Rate Volatility
38
A Rolling Loan Gathers No Loss
High Yield Default Rates vs. Issuance
Source: BAML, Moody’s.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0%
2%
4%
6%
8%
10%
12%
14%
16%
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014E
Issu
an
ce a
s %
of
Mark
et
Siz
e
Defa
ult
Rate
(%
)
Default Rate (LHS) Issuance as a % of Market Size (RHS)
39
“Like a Rolling Loan”
High Yield Spreads vs. High Yield Default Rates
Source: JP Morgan, Moody’s. HY spreads represented by the Barclays US Corporate HY Index.
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
0
200
400
600
800
1000
1200
1400
1600
1800
2000
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Tra
ilin
g 1
2 M
on
th D
efa
ult
Rate
(%
)
Sp
read
to
Wo
rst
(bp
s)
High Yield STW HY Default Rate
40
Corporate spreads and mortgage spreads… …have gone in opposite directions
Source: Barclays, Bloomberg.
Balancing Credit and Interest Rate Risk
-40
-30
-20
-10
0
10
20
30
40
50
30Y
Cu
rren
t C
ou
po
n F
an
nie
Mae S
pre
ad
-
Barc
lays C
orp
ora
te A
+ O
AS
(b
ps)
70
80
90
100
110
120
130
140
150
Sp
read
(b
ps)
Barclays Corporate A+ OAS
FNMA Current Coupon 30 Year Spread
41
Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18
40
50
60
70
80
90
100
110
20
30
40
50
60
70
80
90
100
110
May-07 May-08 May-09 May-10 May-11 May-12 May-13
Pu
ert
o R
ico
GO
Pri
ce
Casin
o B
on
d P
rice
MGM 2014 Harrah's 2018 2nd Lien Puerto Rico 2041 GO (RHS)
When You Got Nothing, You Got Nothing to Lose
Puerto Rico GO Bonds vs. the Case of the Casinos
Puerto Rico bonds following path of casino bonds
Source: Bloomberg.
Past performance is no guarantee of future results.
42
3 Key Action Items
1. Manage duration and curve risk in fixed income
• Utilize FLEXIBLE strategies
2.Rebalance credit and interest rate risks
• Tactically reduce overweights Non-Agency RMBS due to high valuations and limited
upside; tactically allocate to High Yield and Bank Loans (neutral weight)
• Overweight commercial real estate; look for flexible positioning in emerging markets
3.Shorten duration, but don’t own short duration
• Barbell short and long and reduce 2-5 year exposures; implement bond ladders
43
Fixed Income Thought Leadership
2014 Fixed Income Outlook
Monthly Fixed Income Commentary
Timely Special Reports
Point of View
Easy to Subscribe – visit www.blackrock.com
1. Visit www.blackrock.com
2. Find Jeff Rosenberg’s latest monthly and other resources under “Insights – Fixed Income”
3. Subscribe to regular updates through the Literature section under “Resources – Literature”
4. Search by keyword “Fixed Income Market Strategy” and subscribe under “Actions”
44
Important notes
This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to
buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of December, 2014 and may change as subsequent
conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by
BlackRock and/or its subsidiaries (together, “BlackRock”) to be reliable, are not necessarily all inclusive and are not guaranteed as to accuracy.
There is no guarantee that any forecasts made will come to pass. Any investments named within this material may not necessarily be held in any
accounts managed by BlackRock. Reliance upon information in this material is at the sole discretion of the reader. Past performance is no
guarantee of future results. Reliance upon information in this material is at the sole discretion of the reader. Investment involves risks.
International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation, and the possibility of
substantial volatility due to adverse political, economic or other developments. These risks are often heightened for investments in
emerging/developing markets or smaller capital markets.
The information contained in this material is derived from third-party sources deemed reliable, but BlackRock does not guarantee the
completeness or accuracy of the information.
The two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a
corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal
and interest payments. Stock and bond values fluctuate in price so the value of your investment can go down depending upon market conditions.
Investments in non-investment-grade debt securities (“high-yield bonds” or “junk bonds”) may be subject to greater market fluctuations and risk of
default or loss of income and principal than securities in higher rating categories. Investments in the financial services industry may be susceptible
to certain economic, competitive and regulatory developments associated with such industries.
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