The document summarizes Putnam's fixed-income outlook for Q4 2013. It discusses: 1) The Fed surprised markets by not tapering its bond-buying program, keeping rates low for longer but also increasing rate volatility driven by economic data. 2) Putnam believes the decline in labor participation may be more structural than cyclical, potentially leading to rapid policy tightening in 2014 if unemployment falls quickly. 3) Securitized sectors like agency mortgage-backed securities and commercial mortgage-backed securities benefited from Fed policy and remained overweight positions.

1. Q4 2013 » Putnam Perspectives
Fixed-Income Outlook
Tapering on hold, but rate volatility
here to stay
Key takeaways
• The Fed’s surprise September decision not to taper its bondbuying program complicates the development and reliability
of consensus policy expectations.
• We believe the current decline in labor participation may be
more structural than cyclical, which could lead to rapid policy
tightening at some point in 2014.
l
U.S. tax exempt
l
Tax-exempt high yield
Agency mortgage-backed securities
Overweight
U.S. government and agency debt
Neutral
Fixed-income asset class
Underweight
Arrows in the table indicate the change
from the previous quarter.
Small overweight
Putnam’s outlook
Small underweight
• We believe longer duration-oriented indexes, and fixedincome approaches that align closely with them, present
inordinately high risks to investors in the current environment.
l
l
Collateralized mortgage obligations
l
Non-agency residential mortgage-backed securities
l
Commercial mortgage-backed securities
l
U.S. floating-rate bank loans
l
U.S. investment-grade corporates
l
Global high yield
l
Emerging markets
l
U.K. government
Core Europe government
l
l
Peripheral Europe government
Japan government
CURRENCY SNAPSHOT
Dollar vs. yen: Neutral
Dollar vs. euro: Euro
Dollar vs. pound: Neutral
l
l
While we thought the beginning of the end
of quantitative easing (QE) was coming into
focus in June, by mid September we witnessed
its temporary retreat. Despite widely shared
expectations that the Fed would announce
a $10 billion to $15 billion cut to its $85 billion
monthly bond-buying program — otherwise
known as “tapering” — the Fed surprised
markets by maintaining purchases at current
levels. While the Fed’s September meeting
press release claims an expectation for
“ongoing improvement in the labor market,” the
Fed also stated it must “await more evidence
that progress will be sustained,” and again
reminded the public that the central bank’s
highly accommodative monetary policies
would remain “contingent on the Committee’s economic outlook.” It also appears that
the decision not to taper was partly due to
concerns about political discord in Washington.
The bond market absorbed the Fed’s
September opinion by staging a rally in rates
and risk assets late in the third quarter. Shortterm rates, it appears, may be kept lower
for longer. Purchases in mortgage markets
are not stopping or being curtailed just yet,
which should continue to provide downward
pressure on long-term rates. But all of this
could change if the data move the Fed to act
otherwise.

2. Q4 2013 | Fixed-Income Outlook
Misreading labor participation a rising problem
for policymakers
Importantly, the unemployment threshold of 6.5% —
the point at which the Fed has suggested it could begin
raising the federal funds rate — is not the only factor that
would influence a rate change. “Additional measures of
labor market conditions, indicators of inflation pressures
and inflation expectations, and readings on financial
developments” could also play critical roles in determining
the course of future Fed policy.
The Fed and market observers, of course, may read the
data differently, which makes it doubly hard to know
when and how quickly policy may change. However, we
believe the Fed may be reading U.S. employment data
in such a way that it will be inclined to keep policy highly
accommodative for longer. This is unlikely to change
with the installation of Janet Yellen, a key architect of the
central bank’s asset-purchasing program, as the new Fed
Chair in 2014 pending Congressional approval.
With its emphasis on contingency, the Fed has destabilized the market’s ability to form consensus policy
expectations and turned the market back on what the
data can tell us about how the economy is doing. In our
view, this makes for a continuing regime of rate volatility
driven by real-time economic releases.
However, we read the data a bit differently. In
particular, we read the data on labor participation —
which is intimately tied to the unemployment rate and
GDP growth — as the potential catalyst for a wageinflation surprise that could lead to a rapid tightening
of policy ahead of the Fed’s current guidance.
Fixed-income assets generally
rebounded from second-quarter
weakness.
Figure 1: ixed-income asset
F
class performance
2%
2Q 13
3Q 13
1%
0%
-1%
-2%
-3%
-4%
-5%
-6%
U.S.
government
U.S.
tax
exempt
Taxexempt
high
yield
Agency Commercial
U.S.
U.S.
mortgage- mortgage- floating- investmentbacked
backed
rate
grade
securities securities bank loans corporate
debt
Global
high
yield
Emergingmarket
debt
U.K.
gov’t
Source: Putnam research, as of 9/30/13. Past performance is not indicative of future results. See page 10 for index definitions.
2
Eurozone
gov’t
Japan
gov’t

3. PUTNAM INVESTMENTS | putnam.com
If the drop in labor participation is structural rather than
cyclical, then the Fed may have to raise rates a lot sooner —
sooner than the Fed itself may currently expect.
Labor participation: cyclical factors
Policy may tighten more rapidly than expected
At the moment, labor participation is in decline. In an
economic downturn, labor force participation typically
drops, primarily for two reasons. The first is that young
people react to the weakness of the labor market by
continuing their education or earning extra qualifications.
The second is the “discouraged” worker effect; people try
to find work, but find they are unable to get a job and then
stop looking.
The Fed understands the current decline in labor
participation as a largely cyclical phenomenon. Some
members of the Fed believe that the normal relationships
apply — that the current drop in participation is cyclical,
and once the economy gathers momentum, we will
achieve a “normal” pattern of rapid job creation, but only
slight declines in unemployment. On this “typical-cycle”
view, the Fed could keep monetary policy easy for an
extended period, since growth with high unemployment
means there will be no upward pressure on wages, which
generally could imply a lack of inflationary pressure.
In a typical cycle of downturn followed by recovery,
both of these effects tend to reverse themselves in short
order. The young people finish their education and pick
up with their job search, while the “discouraged” workers
find encouragement from the new availability of jobs
and start looking again as well. This helps explain why
the measured unemployment rate does not fall very fast
during a typical upturn: as jobs are created, people seek
to rejoin the labor force.
On the other hand, if the drop in participation is
structural rather than cyclical, then the Fed may have to
raise rates a lot sooner — sooner than the Fed itself may
currently expect. When the economy picks up speed,
unemployment could fall faster and the labor market
would tighten, threatening upward pressure on wages.
This is not a critical concern for interest rates in the next
six months because unemployment remains relatively high.
But it could matter a lot at some point in 2014. What is the
correct ratio of cyclical to structural factors in labor participation? The data have yet to tell a clear story. But a big
cyclical component to participation would help keep shortterm rates low, while a small cyclical component would
mean an earlier jump in rates, as it could force the Fed to
act sooner in order to counteract inflation pressures.
Labor participation: structural factors
The longer a recession goes on, however, the weaker this
reversal and the more “structural” the decline in labor
participation can become. In part, this is due to the aging
of the “discouraged” out-of-work population, and because
the longer people are out of work, the more their skills
atrophy and the more they become accustomed to their
new lifestyle.
Two additional structural factors affecting labor
participation in the United States in the current cycle are
the decline of women in the workforce and the mounting
numbers of retiring Baby Boomers. From 1950 to the mid
1990s, female labor participation rose steadily. From an
economic perspective, this produced a labor participation growth rate that exceeded the population growth
rate. Eventually, this factor plateaued, and subsequently
has been falling slowly for well over a decade. As for the
Baby Boomers, their aggregate move into retirement
will naturally cause the growth of the labor force to slow.
The financial crisis hit savings hard, and so a greater
proportion of older workers has continued working.
Nevertheless, participation rates inevitably tend to drop
as people pass their mid 50s.
Fundamental and policy tailwinds for
securitized sectors
Mortgage interest rates have risen by approximately 100
basis points year to date through September. Looking at
the balance of data, the Fed found these rates too high
and the dampening effect on home affordability too
large, expressing this opinion in the decision not to taper.
Nevertheless, housing data in terms of starts, construction
permits, and price appreciation are still telling a positive
story, in our view. We believe this growth will continue,
and that the Fed’s policy support for lower rates and
mortgage-buying activity will translate into additional
strength in this area. Consequently, our mortgage-related
investment strategies remain relatively unchanged.
3

4. Q4 2013 | Fixed-Income Outlook
Figure 2. Rates moved higher as the Fed
discussed winding down its
bond-buying programs
Policy uncertainty could keep rate
volatility elevated in the months ahead.
3%
9/30/13
6/30/13
2%
1%
s
ye
ar
30
ye
10
ye
7
ar
s
s
ar
s
5
ye
ar
s
ar
ye
3
1m
o
1 nth
ye
ar
0%
Source: U.S. Department of the Treasury, as of 9/30/13.
Interest-only collateralized mortgage obligations (IO
CMOs), which performed well in the third quarter, remain
attractive to us. As interest rates rose in recent months,
the likelihood that the mortgages underlying CMOs would
be refinanced declined, helping to boost these securities’
value. We do not see a drastic decline in rates in the
months ahead and thus do not expect prepayment risk
to increase.
Securitized markets, which include non-agency
RMBS, CMOs, and CMBS, depend on brokers to facilitate
transactions between buyers and sellers. Although the
United States has implemented a number of regulatory
reforms that bear directly on these brokers’ business,
there is still a fair amount of uncertainty over how much
capital brokers will need to hold against securitized
positions in the future. For this reason, brokers are still
tentative about some trading and positioning, which
translates into a liquidity premium in the price of many
securitized bonds. Coupled with the Fed’s plans to
maintain their quantitative easing programs for the time
being, we think this factor will continue to enhance the
attractiveness of the sector in the months ahead.
Mortgage credit holdings — most notably, commercial mortgage-backed securities (CMBS) — delivered
modestly positive performance, aided by stable-to-rising
commercial property values. Within CMBS, select areas
in “mezzanine” bonds rated BBB/Baa, which offered
higher yields at what we believed were acceptable risks,
also performed well on a relative basis. Currently, we favor
higher-tier securitized bonds in the non-agency residential
mortgage-backed securities (non-agency RMBS) market,
and we continue to steer clear of the more damaged areas
of the subprime market.
4

5. PUTNAM INVESTMENTS | putnam.com
High-yield strength against a backdrop of
modest economic recovery
A pickup in merger and acquisition activity also proved
to be a tailwind for the high-yield sector. During the third
quarter, there were a number of acquisitions in which
high-yield companies were merged into companies with
higher credit ratings. Historically, when capital market
conditions are favorable and there has been a long period
of cost-cutting and productivity enhancements by larger
U.S. companies, these companies have sought to add
product lines, markets, and/or scale. Frequently, they will
acquire smaller companies to accomplish those goals.
As interest rates leveled out in the third quarter,
high-yield bonds performed well and outpaced
floating-rate bank-loan securities. In addition,
high-yield market technicals improved, as flows
into the asset class returned to positive territory.
Spreads compressed
but in many cases
remained close to their
historical averages.
1000 Figure 3. Current spreads relative to historical norms
1000
A
n verage excess yield over Treasuries
(OAS, 1/1/98–12/31/07)
800
800
C
n urrent excess yield over Treasuries
(OAS as of 9/30/13)
725
725
600
600
700
700
573
573
506
506
425
425
400
400
330
330
200
200
130130
0 0
34 34
41 41
Agencies
Agencies
56 56
4343
141
141
89 89
123
123
123123
Agency
Agency Investment-grade AAA CMBS
Investment-grade AAA CMBS
MBS
MBS
corporates
corporates
High yield
High yield
200
200
Non-agency
Non-agency
RMBS
RMBS
150 200
150 200
Agency IO IO
Agency
EMD
EMD
Sources: Barclays, Putnam, as of 9/30/13.
Data are provided for informational use only. Past performance is no guarantee of future results. All spreads are in basis points and measure optionadjusted yield spread relative to comparable maturity U.S. Treasuries with the exception of non-agency RMBS, which are loss-adjusted spreads to
swaps calculated using Putnam’s projected assumptions on defaults and severities, and agency IO, which is calculated using assumptions derived
from Putnam’s proprietary prepayment model. Agencies are represented by Barclays U.S. Agency Index. Agency MBS are represented by Barclays
U.S. Mortgage Backed Securities Index. Investment-grade corporates are represented by Barclays U.S. Corporate Index. High yield is represented by
Barclays U.S. Corporate High Yield Index. AAA CMBS are represented by the Aaa portion of Barclays Investment Grade CMBS Index. EMD is represented by Barclays Global Emerging Markets Index. Non-agency is estimated using average market level of a sample of below-investment-grade
securities backed by Alt-A collateral. Agency IO is estimated from a basket of Putnam-monitored interest-only securities. Option-adjusted spread
(OAS) measures the yield spread over duration equivalent Treasuries for securities with different embedded options.
5

6. Q4 2013 | Fixed-Income Outlook
Bond returns gained ground versus
Treasuries amid central bank policy
uncertainty and political wrangling.
Figure 4. Spread sectors’ excess
returns relative to Treasuries
0.8%
0.6%
0.4%
0.2%
0.0%
-0.2%
CMBS
Corporates
MBS
U.S. agency
ABS
Source: Barclays, as of 9/30/13. Past performance is not indicative of future results.
In light of stronger balance sheets and ample cash
reserves, investment-grade companies have become
more comfortable taking on slightly more debt, while
seeking higher returns on their invested capital. Typically,
our high-yield portfolios can benefit from mergers or
acquisitions in one of two ways. The restrictive covenants
governing high-yield bonds often will prompt the
acquiring company to redeem the target company’s
outstanding bonds. Alternatively, if the outstanding bonds
are not redeemed, the prices of the target company’s
bonds will rise as their yields move lower to more closely
align with the yields on bonds issued by the higher-rated
acquirer.
Looking forward, the fundamental backdrop for highyield bonds remains solid, in our view. High-yield issuers
are in reasonably good financial shape, and the default
rate remains near historically low levels. The U.S. economy
continues to grow, albeit slowly; Europe appears to be
emerging from recession; and growth in Asia is improving.
Our overall outlook is positive, because, historically, highyield bonds have done well during periods of moderate
economic growth.
When interest rates were lower and credit spreads
were tighter, a significant proportion of high-yield bonds
were trading at premium prices, meaning above their par
value. Because high-yield bonds can generally be called
away by the issuer prior to their maturity dates, the market
was effectively stuck at higher prices without providing
much call protection. While the asymmetry of the highyield market has improved somewhat, the market does
offer better total return potential.
From a fundamental point of view, we see underlying strength in the
economy and among corporates.
6

7. PUTNAM INVESTMENTS | putnam.com
Investment-grade credit: continued strength
assets negatively, including corporate credit. However,
when rising rates are associated with an economic
recovery, it bodes well for corporate spreads; consequently, we believe spreads will begin to tighten as the
year comes to a close and into 2014.
During the third quarter, we continued to see strong
fundamentals among investment-grade bond issuers.
Profit margins are high, and balance sheets are in good
shape. In addition, where companies are becoming
increasingly leveraged, they are generally issuing
debt at low cost with long-dated maturities. Although
investment-grade credit has rallied significantly since the
2008 financial crisis, spreads remain wide versus historical
averages, and we see the sector as offering further
potential for investors to benefit from narrowing spreads.
From a sector perspective, securities issued by financial
institutions, particularly large, money center banks,
were among the best performers in the third quarter.
Regulation has continued to transform the banking
industry by limiting risky activities and increasing
capital requirements, which has resulted in a sustained
improvement in credit spreads.
Rate volatility may not derail credit opportunities
We also favor stable cash flow generators like utilities, as
well as cable and media companies.
Higher rate volatility, which markets have been grappling
with since the second quarter, affects all fixed-income
Figure 5. igh-yield spreads and defaults generally
H
move in tandem over credit cycles
High-yield default rate
Spread to worst
Current spread: 506 bps (as of 9/30/13)
20-year median spread: 538 bps
Average default rate: 4.3%
Default rate
1990–91
recession
2000
1600
2001
recession
1200
800
8
400
4
0
0
’87 ’88 ’89 ’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 9/30/13
Sources: JPMorgan, High Yield Market Monitor, 9/30/13. A basis point (bp) is one-hundredth of a percent. One hundred basis points equals one
percent. Spread to worst measures the difference between the best- and worst-performing yields in two asset classes.
7
Spreads (bps)
12
Today, the gap between spreads
and defaults remains wide, signaling
opportunity for investors
2007–09
recession
20
16
Spreads have come in from
all-time highs; defaults
remain low.

8. Q4 2013 | Fixed-Income Outlook
Global bonds: developed-market strength,
emerging-market weakness
issues have been exposed that may prove to be obstacles
for this asset class. Those countries that apparently did
not use the recent era of global quantitative easing to
improve their fiscal policies now appear to have relatively
poor fundamentals and are faced with a negative environment for raising additional capital.
The global macroeconomic environment, though less
solid than the United States, appears to be stabilizing. This
is particularly the case in Europe, which we see emerging
from its recession, and in Japan, which is pursuing an
aggressive policy agenda to weaken the yen and pull
the economy out of a multi-decade period of deflation.
China, too, reported positive manufacturing data above
economists’ expectations late in the third quarter, which
suggests China is registering some success in avoiding the
“hard landing” that might otherwise have a more disruptive effect on global markets.
A continued widening of emerging-market debt spreads
could potentially lead to sustained weakness in emergingmarket currencies. However, we do not see the present
enacting a repeat of past emerging-market crises — such as
the Asian currency crisis of 1998. Since that period, a variety
of developing countries have developed local debt markets
and enhanced their domestic growth profile. Yet, for all
this greater diversification of underlying economic activity,
we believe emerging -market debt will face challenging
conditions in the near term.
Emerging debt markets may continue to struggle
In emerging markets more generally, the Fed tapering
discussion caused debt to sell off late in the second
quarter of 2013, and outflows from this sector continued
through the third quarter. As that has happened, other
The most attractive relative values
appear to be in the BBB-rated
segment of the muni market.
Figure 6: unicipal bond credit spreads
M
have narrowed from historical wides
Municipal bond spreads by quality rating
AA
A
BBB
500
400
300
200
100
0
1999
2000
2001
2002
2003
2004
2005
2006
Sources: Putnam, as of 9/30/13. Credit ratings are as determined by Putnam.
8
2007
2008
2009
2010
2011
2012
9/30/13

9. PUTNAM INVESTMENTS | putnam.com
The last-minute deal on the debt ceiling kept the government from a technical
default; however, the temporary nature of the agreement has potentially severe
implications for asset markets.
Municipal bonds: finding opportunities amid
volatile conditions
occasional isolated incidents, as in the case of Detroit’s
bankruptcy filing in July and heightened concern over
Puerto Rico credit profile more recently.
The debate over the pace of tapering and eventual withdrawal of the Federal Reserve’s QE program contributed
to a challenging environment for municipal bonds in
the third quarter. Rates climbed during July and August
before rallying in September. Overall, the municipal
bond yield curve steepened. The upward trend in rates
depressed performance, as bond prices move in the
opposite direction of rates.
Given the improvement in state budget forecasts,
Moody’s revised its outlook for U.S. states in August to
stable after five years of issuing negative ratings. Credit
quality at the state level remains quite high, with 30 of
the 50 states holding either an Aaa or Aa1 rating, the
two highest possible ratings. On balance, we think the
outlook is becoming increasingly stable, given the general
improvement in employment, economic growth, and
consumer confidence — all of which have contributed to
rising tax collections.
Technical pressures were also a headwind for much
of the third quarter. Faced with the prospect of higher
interest rates, many retail investors sold their municipal
bond investments. Detroit’s bankruptcy and Puerto Rico’s
debt challenges also created headline risk and added to
investor fears. However, in September, the technical backdrop improved somewhat. Municipal bond prices rallied as
demand from price-conscious retail and crossover-buyers
picked up, and outflows from municipal bond funds
slowed. In addition, there has been a significant reduction
in refunding activity across the municipal bond market.
After the Fed surprised many observers by deciding not
to begin tapering in September, municipal bond prices
generally rallied.
Our municipal positioning emphasizes higher tiers of
lower-rated bonds
The third quarter proved to be a volatile time for municipal
bonds, and market conditions remain less than robust.
However, we identified what we considered improving
fundamentals and still attractive spreads in the market
and sought to benefit from them. Generally speaking,
essential service revenue bonds are faring well, and we
have maintained our overweight position in revenue
bonds rated BBB.
We continue to have a constructive outlook for municipal bonds, especially as part of a diversified portfolio and
for long-term investors seeking tax-free income. The third
quarter proved to be a very volatile time for municipal
bonds, and market conditions remain less than robust.
It is worth noting that while spreads are much narrower
than they were at their peak, we believe the recent sell-off
has created more attractive opportunities in a dislocated
municipal market.
Periods of high volatility, although unpleasant for
investors, can offer attractive buying opportunities. Taxexempt yields are more attractive now given the sharp rise
in rates, in our opinion. In fact, we have not seen yields at
this level since 2011. We think our fundamental research
will be the key to unlocking these opportunities and
providing return potential because the municipal market is
exceptionally diverse, composed of small issuers, complex
instruments, and an array of market participants with
varying return objectives. We believe this market dynamic
presents inefficiencies that can make attractive investment opportunities.
In currency markets, the dollar appears
less robust
We are taking relatively less risk in active currency strategies, as the Fed’s decision not to taper its stimulative
bond-buying program and the shutdown of the U.S.
government have created an environment with fewer
opportunities, in our view. The last-minute deal on the
debt ceiling kept the government from a technical default;
however, the temporary nature of the agreement has
potentially severe implications for asset markets. In these
conditions, we have a neutral view toward the U.S. dollar.
Municipal defaults have remained near historical averages
For calendar year 2012, bankruptcy filings represented
approximately 0.12% of the $3.7 trillion municipal bond
market, and they have remained near this rate so far
in 2013 as well. This default rate is in line with historical
averages, and we do not believe defaults will increase
meaningfully in the near future. Having said that, we
do expect to see the ongoing risk that emerges from
9

10. Q4 2013 | Fixed-Income Outlook
Fed’s surprise decision signals caution, but not
a reversal in outlook
We favor a slight overweight to the euro as cyclical
economic growth is improving and the European Central
Bank (ECB) policy remains accommodative. The Fed’s
decision to maintain asset purchases has given the ECB
time by helping to lower the global term premia, relieving
pressure on European short-term interest rates, and
reducing the need for more dovish rhetoric. At the same
time, we are less negative on the British pound sterling
as U.K. economic growth data remain strong, and are
challenging the forward guidance as laid out by the Bank
of England.
Fed officials now appear more concerned about the
hints of softness in the recent economic results, such as
retail sales and the specter of rising mortgage rates over
otherwise positive housing data, and are less impressed
with the strong data elsewhere in the U.S. economy. We
also think the central bank may be more worried about
fiscal issues at the federal level than the financial markets
appear to be, given recent market performance.
From a medium-term perspective, the desire among
policymakers and investors alike is for the financial
markets to return to a more normalized environment.
Consequently, the Fed would prefer to transition from
aggressively providing liquidity to the markets to letting
the markets function on their own again. But, as the Fed
showed markets in September, it can still surprise, and
may continue to do so if economic data signal a reversal
of fortunes for the U.S. recovery. When the Fed eventually
does taper and as rates remain elevated or resume their
upward trend, we think the markets will react with more
volatility. Overall, however, we believe investors may navigate the beginning of the coming transition fairly well, and
we think risk-seeking behavior will continue to be active in
both the credit and stock markets.
Our view on the Japanese yen has become more
neutral. Over the medium term, it is expected that the
Bank of Japan will have to do much more monetary
easing than currently slated, which should provide further
impetus for the dollar to rally versus the yen. We also
believe the yen and Japanese stocks may be more aligned
than was the case earlier this year.
Elsewhere, we now favor a slight overweight to the
Australian dollar and an underweight to the Canadian
dollar. In emerging markets, we favor a relative value
positioning. The surprise by the Fed and the probability
that Janet Yellen will be confirmed as Fed Chairman
increases the chance of much more benign changes to
U.S. monetary policy, but large structural long positions
in local emerging debt markets remain in place for many
investors, which leaves some emerging-market currencies
more susceptible to capital outflows, we believe.
Agency mortgage-backed securities are represented by the Barclays U.S. Mortgage
Backed Securities Index, which covers agency mortgage-backed pass-through
securities (both fixed-rate and hybrid ARM) issued by Ginnie Mae (GNMA), Fannie Mae
(FNMA), and Freddie Mac (FHLMC).
Japan government is represented by the Barclays Japanese Aggregate Bond Index,
a broad-based investment-grade benchmark consisting of fixed-rate Japanese
yen-denominated securities.
Tax-exempt high yield is represented by the Barclays Municipal Bond High Yield
Index, which consists of below-investment-grade or unrated bonds with outstanding
par values of at least $3 million and at least one year remaining until their maturity
dates.
Commercial mortgage-backed securities are represented by the Barclays U.S. CMBS
Investment Grade Index, which measures the market of commercial mortgage-backed
securities with a minimum deal size of $500 million. The two subcomponents of the
U.S. CMBS Investment Grade Index are the U.S. aggregate-eligible securities and
non-eligible securities. To be included in the U.S. Aggregate Index, the securities must
meet the guidelines for ERISA eligibility.
U.K. government is represented by the Barclays Sterling Aggregate Bond Index, which
contains fixed-rate, investment-grade, sterling-denominated securities, including gilt
and non-gilt bonds.
Emerging-market debt is represented by the JPMorgan Emerging Markets Global
Diversified Index, which is composed of U.S. dollar-denominated Brady bonds,
eurobonds, traded loans, and local market debt instruments issued by sovereign and
quasi-sovereign entities.
U.S. floating-rate bank loans are represented by the SP/LSTA Leveraged Loan
Index, an unmanaged index of U.S. leveraged loans.
U.S. government and agency debt is represented by the Barclays U.S. Aggregate
Bond Index, an unmanaged index of U.S. investment-grade fixed-income securities.
Eurozone government is represented by the Barclays European Aggregate Bond
Index, which tracks fixed-rate, investment-grade securities issued in the following
European currencies: euro, Norwegian krone, Danish krone, Swedish krona, Czech
koruna, Hungarian forint, Polish zloty, and Swiss franc.
U.S. investment-grade corporate debt is represented by the Barclays U.S. Corporate
Index, a broad-based benchmark that measures the U.S. taxable investment-grade
corporate bond market.
U.S. tax exempt is represented by the Barclays Municipal Bond Index, an unmanaged
index of long-term fixed-rate investment-grade tax-exempt bonds.
Global high yield is represented by the BofA Merrill Lynch Global High Yield
Constrained Index, an unmanaged index of global high-yield fixed-income securities.
You cannot invest directly in an index.
10

11. PUTNAM INVESTMENTS | putnam.com
This material is provided for limited purposes. It is not
intended as an offer or solicitation for the purchase or sale of
any financial instrument, or any Putnam product or strategy.
References to specific securities, asset classes, and financial
markets are for illustrative purposes only and are not intended
to be, and should not be interpreted as, recommendations
or investment advice. The opinions expressed in this article
represent the current, good-faith views of the author(s) at the
time of publication. The views are provided for informational
purposes only and are subject to change. This material does
not take into account any investor’s particular investment
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views and strategies described herein may not be suitable
for all investors. Investors should consult a financial advisor
for advice suited to their individual financial needs. Putnam
Investments cannot guarantee the accuracy or completeness
of any statements or data contained in the article. Predictions,
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performance is not a guarantee of future results. As with
any investment, there is a potential for profit as well as the
possibility of loss.
Putnam’s veteran fixed-income
team offers a depth and breadth
of insight
Successful investing in today’s markets requires
a broad-based approach, the flexibility to exploit
a range of sectors and investment opportunities,
and a keen understanding of the complex
global interrelationships that drive the markets.
That is why Putnam has more than 70 fixedincome professionals focusing on delivering
comprehensive coverage of every aspect of the
fixed-income markets, based not only on sector,
but also on the broad sources of risk — and
opportunities — most likely to drive returns.
D. William Kohli
Co-Head of Fixed Income
Global Strategies
Investing since 1987
Joined Putnam in 1994
Michael V. Salm
Co-Head of Fixed Income
Liquid Markets and Securitized Products
Investing since 1989
Joined Putnam in 1997
The information provided relates to Putnam Investments and
its affiliates, which include The Putnam Advisory Company,
LLC and Putnam Investments Limited®.
Prepared for use in Canada by Putnam Investments Inc.
[Investissements Putnam Inc.] (o/a Putnam Management in
Manitoba). Where permitted, advisory services are provided
in Canada by Putnam Investments Inc. [Investissements
Putnam Inc.] (o/a Putnam Management in Manitoba) and its
affiliate, The Putnam Advisory Company, LLC.
Paul D. Scanlon, CFA®
Co-Head of Fixed Income
Global Credit
Investing since 1986
Joined Putnam in 1999
11

12. Consider these risks before investing: International investing involves certain risks, such as currency fluctuations,
economic instability, and political developments. Additional risks may be associated with emerging-market securities,
including illiquidity and volatility. Lower-rated bonds may offer higher yields in return for more risk. Funds that invest
in government securities are not guaranteed. Mortgage-backed securities are subject to prepayment risk. Derivatives
also involve the risk, in the case of many over-the-counter instruments, of the potential inability to terminate or sell
derivatives positions and the potential failure of the other party to the instrument to meet its obligations.
Bond investments are subject to interest-rate risk, which means the prices of the fund’s bond investments are likely to
fall if interest rates rise. Bond investments also are subject to credit risk, which is the risk that the issuer of the bond may
default on payment of interest or principal. Interest-rate risk is generally greater for longer-term bonds, and credit risk
is generally greater for below-investment-grade bonds, which may be considered speculative. Unlike bonds, funds that
invest in bonds have ongoing fees and expenses.
You can lose money by investing in a mutual fund.
If you are a U.S. retail investor, please request a prospectus, or a summary prospectus if available, from your
financial representative or by calling Putnam at 1-800-225-1581. The prospectus includes investment objectives,
risks, fees, expenses, and other information that you should read and consider carefully before investing.
In the United States, mutual funds are distributed by Putnam Retail Management.
PUTNAM INVESTMENTS | putnam.com CM0200 283528 10/13