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Doubleline February 2014 Commentary

Doubleline February 2014 Commentary

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Published by CanadianValue
Doubleline February 2014 Commentary
Doubleline February 2014 Commentary

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Published by: CanadianValue on Mar 21, 2014
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05/20/2014

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333
 
S.
 
Grand
 
Ave.,
 
18th
 
Floor
 
||
 
Los
 
Angeles,
 
CA
 
90071
 
||
 
(213)
 
633
8200
 
Monthly
 
Commentary
 
February
 
2014
 
333
 
S.
 
Grand
 
Ave.,
 
18th
 
Floor
 
||
 
Los
 
Angeles,
 
CA
 
90071
 
||
 
(213)
 
633
8200
 
 
2
 
Monthly
 
Commentary
 
2/28/14
 
Overview
 
Market
 
participants
 
were
 
looking
 
for
 
more
 
direction
 
after
 
a
 
rough
 
January
 
that
 
left
 
many
 
to
 
question
 
the
 
general
 
state
 
of 
 
the
 
economy.
 
For
 
the
 
past
 
couple
 
of 
 
months,
 
economic
 
releases
 
appeared
 
to
 
be
 
marred
 
by
 
the
 
effects
 
of 
 
historically
 
cold
 
weather
 
across
 
much
 
of 
 
the
 
country.
 
Questions
 
surrounding
 
this
 
issue
 
have
 
heightened
 
the
 
debate
 
into
 
exactly
 
how
 
much
 
slack
 
exists
 
in
 
the
 
labor
 
market
 
among
 
other
 
factors.
 
February
 
provided
 
some
 
answers
 
as
 
 job
 
growth
 
appeared
 
more
 
robust
 
than
 
initially
 
anticipated.
 
Nonfarm
 
payrolls
 
surprised
 
many
 
rising
 
by
 
175,000
 
with
 
net
 
revisions
 
totaling
 
25,000
 
over
 
the
 
previous
 
two
 
months.
 
Despite
 
the
 
addition,
 
the
 
unemployment
 
rate
 
rose
 
to
 
6.7%
 
as
 
the
 
number
 
of 
 
individuals
 
entering
 
the
 
workforce
 
outpaced
 
those
 
hired.
 
Monthly
 
Commentary
 
A
 
second
 
revision
 
of 
 
fourth
 
quarter
 
Gross
 
Domestic
 
Product
 
(GDP)
 
was
 
also
 
a
 
focal
 
point
 
as
 
growth
 
came
 
in
 
below
 
consensus
 
estimates
 
at
 
2.4%
 
quarter
over
quarter
 
(QoQ).
 
Although
 
this
 
is
 
a
 
lagging
 
indicator
 
of 
 
the
 
current
 
strength
 
of 
 
the
 
economy,
 
Personal
 
Consumption
 
Expenditures
 
(PCE)
 
and
 
demand
 
for
 
both
 
goods
 
and
 
services
 
pointed
 
to
 
weakness.
 
Perhaps
 
investors
 
continued
 
to
 
appreciate
 
the
 
relatively
 
strong
 
growth
 
seen
 
in
 
the
 
U.S.
 
compared
 
to
 
the
 
0.5%
 
QoQ 
 
growth
 
seen
 
in
 
the
 
eurozone.
 
In
 
addition,
 
the
 
fiscal
 
situation
 
in
 
Washington
 
continues
 
to
 
improve
 
with
 
cumulative
 
fiscal
 
year
 
deficit
 
of 
 
$378
 
billion
 
becoming
 
the
 
lowest
 
amount
 
at
 
this
 
point
 
of 
 
the
 
year
 
since
 
2008.
 
Equity
 
markets
 
rallied
 
during
 
the
 
month,
 
either
 
shrugging
 
off 
 
any
 
future
 
tightening
 
by
 
the
 
Federal
 
Reserve
 
(the
 
Fed),
 
or
 
embracing
 
corporate
 
profits
 
that
 
continue
 
to
 
be
 
at
 
all
 
time
 
highs.
 
The
 
4.3%
 
return
 
in
 
the
 
S&P
 
500
 
Index
 
in
 
February
 
more
 
than
 
erased
 
the
 
uneasy
 
3.6%
 
start
 
to
 
the
 
year.
 
Ten
year
 
U.S.
 
Treasury
 
(UST)
 
yields
 
took
 
a
 
quite
 
volatile
 
path
 
to
 
end
 
the
 
month
 
less
 
than
 
a
 
basis
 
point
 
from
 
where
 
they
 
began
 
the
 
month
 
at
 
2.65%.
 
050100150200250300350Mar
12 Jun
12 Sep
12 Dec
12 Mar
13 Jun
13 Sep
13 Dec
13
      N     e      t      P     a     y     r     o      l      l      A      d      d      i      t      i     o     n     s      (      0      0      0      '     s      )
Nonfarm
 
Private
 
Payrolls
 
 Net
 
Change
BLSADP
Source:
 
Bureau
 
of 
 
Labor
 
Statistics, Bloomberg,
 
ADP
Last
 
BLS
 
=
 
175KLast
 
ADP
 
=
 
139K
1,500.00
1,300.00
1,100.00
900.00
700.00
500.00
300.00
100.00100.00
 Fiscal
 
Year
 
Cumulative
 
Federal
 
Budget
 
Deficit
200620072008200920102011201220132014
Source:
 
US
 
Treasury, Bloomberg
0.0%2.0%4.0%6.0%8.0%10.0%12.0%0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%10.0%
     0     1     /     6     5     0     7     /     6     7     0     1     /     7     0     0     7     /     7     2     0     1     /     7     5     0     7     /     7     7     0     1     /     8     0     0     7     /     8     2     0     1     /     8     5     0     7     /     8     7     0     1     /     9     0     0     7     /     9     2     0     1     /     9     5     0     7     /     9     7     0     1     /     0     0     0     7     /     0     2     0     1     /     0     5     0     7     /     0     7     0     1     /     1     0     0     7     /     1     2
Unemployment
 
versus
 
Earnings
YoY
 
Earnings
 
Growth
 
(LHS)
Source:
 
Bureau
 
of 
 
Labor
 
Statistics, BloombergLHS
 
=
 
left
hand
 
side
 
y
axis
 
and
 
RHS
 
=
 
right
hand
 
side
 
y
axis
 
3
 
Monthly
 
Commentary
 
2/28/14
 
Emerging
 
Markets
 
Fixed
 
Income
 
Markets
 
rebounded
 
sharply
 
this
 
month,
 
as
 
mixed
 
economic
 
data
 
points
 
did
 
not
 
appear
 
to
 
deter
 
investors
 
from
 
risk
 
assets
 
following
 
January’s
 
selloff.
 
Across
 
the
 
Emerging
 
Markets
 
(EM),
 
several
 
central
 
banks
 
addressed
 
volatility
 
in
 
their
 
respective
 
local
 
currencies
 
with
 
aggressive
 
policy
 
talk
 
and
 
rate
 
hikes.
 
Still,
 
the
 
fundamental
 
picture
 
in
 
a
 
number
 
of 
 
weaker
 
emerging
 
markets
 
economies
 
does
 
not
 
appear
 
to
 
have
 
materially
 
changed,
 
while
 
socio
political
 
unrest
 
continues
 
to
 
remain
 
a
 
headline
grabbing
 
factor.
 
In
 
foreign
 
markets,
 
the
 
eurozone
 
witnessed
 
both
 
its
 
services
 
and
 
manufacturing
 
sectors
 
expand
 
both
 
at
 
a
 
faster
 
pace
 
than
 
in
 
January
 
and
 
by
 
more
 
than
 
consensus
 
estimates.
 
However,
 
the
 
advance
 
Core
 
Consumer
 
Price
 
Index
 
data
 
showed
 
an
 
increase
 
of 
 
1.0%
 
year
over
year
 
(YoY),
 
which
 
was
 
below
 
the
 
European
 
Central
 
Bank’s
 
(ECB’s)
 
2.0%
 
target.
 
The
 
ECB
 
continues
 
to
 
weigh
 
the
 
possibility
 
of 
 
negative
 
deposit
 
rates.
 
In
 
China,
 
while
 
the
 
government’s
 
official
 
data
 
release
 
showed
 
the
 
sector
 
expanded
 
at
 
a
 
slightly
 
faster
 
pace,
 
the
 
private
 
HSBC/Markit
 
Manufacturing
 
Purchasing
 
Managers’
 
Index
 
showed
 
contraction
 
for
 
a
 
second
 
straight
 
month.
 
The
 
extent
 
of 
 
a
 
large
scale
 
credit
 
bubble
 
remains
 
a
 
concern
 
for
 
both
 
officials
 
and
 
investors,
 
with
 
China
 
witnessing
 
its
 
first
 
onshore
 
default,
 
a
 
solar
cell
 
manufacturer,
 
in
 
early
 
March.
 
EM
 
nations
 
whose
 
debt
 
and
 
currencies
 
had
 
sold
off 
 
sharply
 
in
 
January
 
saw
 
a
 
reversal
 
of 
 
fortune
 
in
 
February:
 
nations
 
such
 
as
 
Argentina
 
and
 
Venezuela
 
were
 
among
 
the
 
top
 
gainers
 
for
 
local
 
and
 
hard
 
currency
 
bonds.
 
These
 
gains
 
were
 
realized
 
despite
 
no
 
material
 
changes
 
in
 
the
 
fundamental
 
picture
 
of 
 
their
 
economies.
 
Venezuela
 
continues
 
to
 
be
 
impacted
 
by
 
widespread
 
social
 
unrest
 
as
 
protestors
 
take
 
to
 
the
 
streets
 
against
 
the
 
Chavista
 
policies
 
of 
 
President
 
Nicolas
 
Maduro.
 
Officials
 
there
 
announced
 
a
 
new
 
foreign
 
currency
 
market,
 
the
 
Sicad
 
II,
 
though
 
the
 
relevant
 
regulations
 
have
 
not
 
yet
 
been
 
published.
 
It
 
remains
 
to
 
be
 
seen
 
if 
 
there
 
will
 
be
 
limitations
 
for
 
dollar
 
purchases
 
or
 
if 
 
the
 
exchange
 
will
 
allow
 
the
 
market
 
to
 
be
 
“self 
 
regulating”.
 
The
 
Venezuelan
 
government’s
 
arrest
 
of 
 
an
 
opposition
 
leader
 
also
 
appears
 
likely
 
to
 
fuel
 
further
 
protests.
 
Argentina,
 
which
 
had
 
also
 
been
 
troubled
 
by
 
a
 
strong
 
January
 
selloff 
 
in
 
its
 
sovereign
 
bonds,
 
saw
 
its
 
markets
 
bounce
 
back
 
amid
 
one
 
of 
 
the
 
first
 
market
friendly
 
moves
 
by
 
President
 
Christina
 
Fernandez’s
 
Administration
 
in
 
some
 
time:
 
the
 
government
 
released
 
a
 
new
 
index
 
to
 
more
 
accurately
 
reflect
 
inflation,
 
after
 
having
 
been
 
censured
 
by
 
the
 
International
 
Monetary
 
Fund
 
for
 
systematically
 
underestimating
 
price
 
increases.
 
Finally,
 
global
 
headlines
 
were
 
captivated
 
by
 
the
 
tense
 
standoff 
 
between
 
Ukraine
 
and
 
Russia
 
following
 
the
 
late
 
February
 
ouster
 
of 
 
Russophile
 
President
 
Viktor
 
Monthly
 
Commentary
 
7.0%
5.0%
3.0%
1.0%1.0%3.0%5.0%
     F    e     b
      ‐
     1     3     M    a    r
      ‐
     1     3     A    p    r
      ‐
     1     3     M    a    y
      ‐
     1     3     J    u    n
      ‐
     1     3     J    u     l
      ‐
     1     3     A    u    g
      ‐
     1     3     S    e    p
      ‐
     1     3     O    c    t
      ‐
     1     3     N    o    v
      ‐
     1     3     D    e    c
      ‐
     1     3     J    a    n
      ‐
     1     4     F    e     b
      ‐
     1     4
JP
 
Morgan
 
Emerging
 
Markets
 
Bond
 
Index
 
PerformanceLast
 
12
 
Months
EMBICEMBIGBI
EM
Source:
 
JP
 
Morgan
 
Tickers
 
February
 
Return
 
Last
 
3
 
Months
 
YTM
 
Spread
 
S&P
 
Ratings
 
EMBI
 
JPGCCOMP
 
3.03%
 
2.85%
 
5.69%
 
320
 
BBB
CEMBI
 
JBCDCOMP
 
1.70%
 
2.27%
 
5.48%
 
323
 
BBB
 
GBI
EM
 
JGENBDUU
 
3.16%
 
0.68%
 
6.87%
 
N/A
 
A
Source:
 
JP
 
Morgan
 
(Past
 
performance
 
is
 
no
 
guarantee
 
of 
 
future
 
results.)
 

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