Laddered Bonds, Expert Selection

Western Asset Bond Ladders

In today’s environment of heightened interest rate volatility risk, a laddered bond portfolio may offer stable income and principal preservation. Direct bond ownership offers other potential benefits, too:


Rigorous selection & monitoring

By one of the world’s leading
fixed income managers

Higher reinvestment potential

as maturing bonds are reinvested at higher
prevailing rates in a rising rate environment

Opportunity for steady income

Derived from staggering bond maturities

Four laddered options, one expert approach

Corporate Bond Ladders

For clients seeking a diversified portfolio of credit-monitored investment-grade corporate securities with equally weighted maturities from 1-5 and 1-10 years.

Municipal Bond Ladders

Designed to deliver tax-free income opportunities while preserving capital and reducing interest rate risk by investing in laddered municipal bonds with equally weighted maturities from 1-15 and 1-30 years.

At a Glance: How Reinvesting May Advance the Ladder

For illustrative purposes only. Minimum initial investment may vary. The investment process may change over time. There is no guarantee the manager’s investment process will be successful.


Concerned About Rising Rates?

As an example, by diversifying across corporate investment-grade industries and issuers, and evenly spaced maturities, laddered portfolios appear tailor-made for rising rate environments.

A corporate bond ladder portfolio may provide predictable, long-term income growth during periods of rising rates.

Hypothetical 10-year bond ladder assuming an initial investment of $100K and an A-rated (Moody’s) credit quality minimum through three potential rising interest rate scenarios


Source: BondEdge.® The chart shown is for illustrative purposes only. The hypothetical data is provided by utilizing BondEdge. The hypothetical results do not represent performance of any investment product and is prepared for illustrative purposes only of A-rated portfolio cash flow scenarios.  The scenarios were developed with three assumptions. 1) Corporate securities are assumed to be A-rated (Moody’s) industrial semi-annual, non-callable, bullet principal payment bonds with an initial maturity of 10 years, and priced at par. 2) Principal and interest cash flows for each bond are calculated for each year, given a gradual parallel shift of 100 to 500 basis points to the U.S. Treasury curve over the next 5 years, and then holding the curve constant over the next 5 years. For instance, for the gradual 200-basis-point shift, the U.S. Treasury curve is assumed to shift upward, in a parallel fashion, 40 basis points (bps) per year for the next 5 years (first interest rate shift occurs 1 year from the start date). The total shift of 200 bps is realized in 5 years and then the U.S. Treasury curve level is held constant. 3) Reinvestment is assumed to occur after the end of each year. Principal and interest from the corporate ladder portfolio is reinvested in a new 10-year, non-callable A-rated (Moody’s) industrial, bullet principal payment bond in which the coupon has been adjusted to reflect the U.S. Treasury curve shift, holding the initial nominal spread of the bond constant. For instance, if a 10-year bond initially has a 3.56% coupon rate, a new 10-year bond 1 year from now in a curve shift of 100 bps is assumed to have a coupon rate of 4.56%. Portfolio characteristics of individual client portfolios in the program may differ, sometimes significantly, from those shown above. It’s important to understand that bond ladder results of individual client portfolios in the program may differ, sometimes significantly, from those shown above. Ratings may change over time. 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 in the financial condition of the party obligated to make payments with respect to such instruments’ changes. Credit ratings by rating agencies are based on a number of factors and do not necessarily reflect the issuer’s current financial condition or volatility or liquidity of the security. The portfolio itself has not been rated by an NRSRO. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the credit qualities or maturity structures listed and should not be used as a sole basis on which to make any investment decisions. BondEdge Solutions LLC is an Interactive Data company. BondEdge Solutions makes no warranties whatsoever, either express or implied, as to merchantability, fitness for a particular purpose, or any other matter. Without limiting the foregoing, BondEdge Solutions makes no representation or warranty that any data or information supplied to or by it are complete or free from errors, omissions or defects. Interactive DataSM is either a registered service mark or a service mark of Interactive Data Corporation in the United States or other countries. BondEdge® is a registered trademark of BondEdge Solutions LLC. BondEdge Solutions is not affiliated with Legg Mason, Inc. Interactive Data does not endorse Legg Mason, Inc.


Why Western Asset for your laddered bond needs?

Over 40+ years of bond selection and monitoring:
  • Taps into the expertise of a highly regarded credit research team with a global reach
In-depth bond research:
  • Helps ensure diversification when reinvesting cash flows
Team-managed approach:
  • Leverages the insights of specialists with distinctive sector expertise

Laddered Bonds, Expert Selection

Investment Idea - Western Asset Corporate Bond Ladders

Features the advantages, investment philosophy, and rate information of this evenly-laddered portfolio of investment-grade corporate bonds.

Related Literature

Fact Sheet

Fact Sheet - Western Asset Corporate Bond Ladders 1-5 Years (SMA)

Detailed product information, including key portfolio and performance statistics.

Fact Sheet

Fact Sheet - Western Asset Corporate Bond Ladders 1-10 Years (SMA - Style)

Detailed product information, including key portfolio and performance statistics.

Fact Sheet

Fact Sheet - Western Asset Municipal Bond Ladders 1-15 Years SMA

Detailed product information, including key portfolio and performance statistics.

Fact Sheet

Fact Sheet - Western Asset Municipal Bond Ladders 1-30 Years SMA

Detailed product information, including key portfolio and performance statistics.

Separately Managed Accounts (SMAs) are investment services provided by Legg Mason Private Portfolio Group, LLC (LMPPG), a federally registered investment advisor. Client portfolios are managed based on investment instructions or advice provided by one or more of the following Legg Mason-affiliated sub-advisers: ClearBridge Investments, LLC and Western Asset Management Company. Management is implemented by LMPPG, the designated sub-advisor or, in the case of certain programs, the program sponsor or its designee.

All investments involve risk, including loss of principal and there is no guarantee that investment objectives will be met. 

Foreign securities, where permitted, are subject to the additional risks of fluctuations in foreign exchange rates, changes in political and economic conditions, foreign taxation, and differences in auditing and financial standards. These risks are magnified in the case of investments in emerging markets. 

Fixed income securities are subject to interest rate and credit risk, which is a possibility that the issuer of a security will be unable to make interest payments and repay the principal on its debt. As interest rates rise, the price of fixed income securities falls. 

There is no guarantee that the Portfolio's objectives will be met.

For tax-exempt securities, certain investors may be subject to the Federal Alternative Minimum Tax, and state and local taxes may apply. Capital gains, if any, are fully taxable. 

Fixed income securities are subject to illiquidity risk, which is the risk that securities may be difficult to sell at certain prices when no market participants are willing to purchase the securities at such prices. 

State-specific and state-biased portfolios within this Portfolio focus on individual states and are more vulnerable to losses caused by adverse developments in those states than are national portfolios, which diversify investments across multiple states. 

Legg Mason, Inc., its affiliates, and its employees are not in the business of providing tax or legal advice to taxpayers. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties or complying with any applicable tax laws or regulations. Tax-related statements, if any, may have been written in connection with the “promotion or marketing” of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor. 

Diversification does not guarantee a profit or protect against loss.

Tapering of the Federal Reserve Board's quantitative easing program and a general rise in interest rates may lead to increased portfolio volatility.