Changes in interest rates can create challenges and opportunities for fixed-income investors.

This calculator is designed to help you explore how laddered municipal and corporate bond portfolios may perform in different interest rate environments
The information presented is hypothetical and for illustrative purposes only, and does not reflect the actual or expected performance of any specific investment strategy.

yrs
Average Maturity
yrs
Average Duration
%
Starting Yield
%
over
yrs
(0.00% per year)

Cumulative Data Your Ladder
1-5 Yrs
BBB

1-5 Yrs
A

1-5 Yrs
BBB

1-10 Yrs
A

1-10 Yrs
BBB

5-10 Yrs
A

5-10 Yrs
BBB
Starting Yield data data data data data data data
5-Year Estimated Total Return
Cumulative
data data data data data data data
Cumulative Data Your Ladder
1-5 Yrs
BBB

1-5 Yrs
A

1-5 Yrs
BBB

1-10 Yrs
A

1-10 Yrs
BBB

5-10 Yrs
A

5-10 Yrs
BBB
Starting Yield data data data data data data data
10-Year Estimated Total Return
Cumulative
data data data data data data data

Estimated Cumulative Income

Estimated Cumulative Total Return

The output of this calculator may not represent the experience of actual investors, and should not be construed as investment, tax or legal advice. Results do not guarantee performance. Any references to future returns should not be construed as a forecast of the results a specific client portfolio may achieve. Availability and customization options for laddered bond portfolios may vary by firm and platform.

The indicated Average Maturity, Average Duration and Starting Yield of the hypothetical laddered bond portfolio are based on bonds currently available in the market for the Minimum Credit Quality (A or BBB) and Laddered Range (minimum of one year and maximum of ten years) selected by the user. Average Maturity is the weighted-average maturity of bonds in the portfolio at inception. Average Duration is the weighted-average duration of bonds in the portfolio at inception based on a modified duration calculation. Starting Yield is the weighted-average yield of bonds in the portfolio at inception. All bonds are assumed to be purchased at par, with indicated yield equal to the coupon rate.

The proceeds of maturing and sold bonds in the hypothetical laddered bond portfolio are assumed to be reinvested in the longest rung of the ladder at the reinvestment yield then available. Changes in reinvestment yields over the life of the portfolio are determined by modifying available yields at inception based on the Rates Change scenario input by the user (which may vary from -3% to +5% over one to ten years). Rates are assumed to change equally across the yield curve and ratably by year. If, for example, the user indicates a 2% rise in interest rates over five years, the calculator assumes that interest rates rise 0.40% annually for five consecutive years across all maturities of the ladder. The calculator assumes that interest rates remain unchanged thereafter.

Estimated Total Return is calculated by adding the weighted-average annual coupon income and the weighted-average price change of each bond in the hypothetical laddered bond portfolio. The change in price of each bond is derived using the price function described below, assuming redemption of maturing bonds at par and semiannual coupon payments. Estimated Income is calculated by adding the weighted-average annual coupon income of each bond in the portfolio.

Indicated Starting Yields, Estimated Total Return and Estimated Income are stated on a pre-tax basis and do not reflect the impact of investment management fees that may apply. Applicable taxes and fees will reduce portfolio value and the amount of income and total return realized. Past performance is no guarantee of future results.

The output presented does not represent the results that any actual portfolio is likely to achieve. The information presented is based in part on certain hypothetical assumptions entered by the user. No representation or warranty is made as to the reasonableness of the assumptions made, or that all factors relevant to the investment returns to be achieved have been fully considered. Simulated results have many inherent limitations, and no representation is made that any account will, or is likely to, achieve results similar to those indicated. Actual performance results may differ substantially from what is indicated. Changes in the assumptions may have a significant impact on the results achieved.

For more individualized information, you should consult your investment professional. You bear sole responsibility for any decisions you make based on the output of this calculator. The calculator makes certain assumptions that may not apply to you, and individual results may vary.

Risks: Investments in corporate debt obligations are subject to the risk of non-payment of scheduled principal and interest. Changes in economic conditions or other circumstances may reduce the capacity of the party obligated to make principal and interest payments on such instruments and may lead to defaults. Such non-payments and defaults may reduce income distributions. The value of a debt obligation also may decline because of concerns about the issuer's ability to make principal and interest payments. In addition, the credit ratings of income securities may be lowered if the financial condition of the party obligated to make payments with respect to such instruments changes. Credit ratings assigned by rating agencies are based on a number of factors and do not necessarily reflect the issuer’s current financial condition or the volatility or liquidity of the security. Fixed-rate corporate securities are also subject to interest rate risk. Rising interest rates generally reduce the value of fixed-rate investments, with longer-duration instruments typically subject to larger price declines.

Methodology: Yield curves are provided by Merrill Lynch and calculated using the Nelson-Siegel model. This four-parameter model can account for the many shapes observed in the curvature of term structures. While originally applied to building traditional rate-maturity curves, the model is used in the calculator to fit option-adjusted spread (OAS)-duration curves. The Minimum Credit Quality input by the user determines which yield curve is used. BBB-minimum and A-minimum ladders may include bonds that have higher ratings.

Bonds in the relevant index universe (e.g., A-rated) are updated on a monthly basis for purposes of selecting constituents for rating sub-indices and daily for purposes of determining spread curves for the relevant corporate rating category. The median OAS and the average of deviates (i.e., the absolute difference of the OAS and median OAS) among bonds in the rating category are calculated, and bonds whose spread is outside the band of four times the average of deviates are excluded from the fitting. The selection parameters are then adjusted to achieve an optimal solution by minimizing the sum of the square of the differences between the bonds and the fitted curve. The bonds are duration-weighted for purposes of calculating best fit. Depending on the curve, the bonds selected may be market-weighted or equal-weighted.

Once the OAS-duration curve is fit, spot and par-coupon corporate yield curves are determined by overlaying the OAS-duration curve on the underlying government bond curve. Since the corporate par curve is a function of maturity, an iterative process is applied to ensure that the resulting par curve is consistent with the OAS-duration curve. The iterative process adjusts the corporate par coupon rate at each maturity point to match the OAS-duration curve.

Investing entails risk, and there is no assurance that Eaton Vance and Parametric-managed funds and accounts will achieve positive returns or avoid incurring losses.

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