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Q2 Seix Market Review & Outlook - Investment Grade Taxable and Tax-Exempt

Peak Growth, Peak Inflation, Rates Rally

As a result of a modestly “less dovish” stance by the Federal Reserve (Fed), long Treasuries were up almost 6.5% in the second quarter after being down 13.5% in the first quarter. Long TIPS (Treasury Inflation-Protected Securities) were up over 8% compared to an 8.8% decline in the first quarter, as they benefited from the upside surprises seen in the consumer price index over the quarter.

In a remarkable turnabout, AAA rated nominal returns led the investment grade corporate market, primarily a function of AAA’s longer duration. BBBs led on an excess return basis, which is duration adjusted. In the high yield market, CCC’s continued to lead the way.

The tax-exempt side saw a continuation of the positive trends of the first quarter: phenomenal retail demand and relatively limited supply—all of which culminated in extraordinarily expensive Muni-Treasury ratios, extraordinarily low yields, and incredibly tight credit spreads.

z - Cover Image: Seix Market Review - Leveraged Finance

The commentary is the opinion of the subadviser. This material has been prepared using sources of information generally believed to be reliable; however, its accuracy is not guaranteed. Opinions represented are subject to change and should not be considered investment advice or an offer of securities.

All investments carry a certain degree of risk, including possible loss of principal.

Past performance is not indicative of future results.