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Virtus Viewpoints - Q2 Newfleet Tax Exempt

Municipal Bonds – Taxable Issuance Drives Supply

The municipal bond market recovered well during the second quarter of the year, following a very volatile end to the first quarter. The Bloomberg Barclays Municipal Bond Index returned 2.72% for the three months ending June 30th, bringing the year-to-date return to 2.08%. While the municipal market has begun to benefit from investors’ renewed interest in taking added risk, given improving economic indicators such as employment and consumer spending, it is still the highest quality bonds that have proven to be the best performers year to date. We continue to believe that higher quality municipal bonds offer reasonably good relative value. While investors are now being compensated more in credit risk spreads for owning the lowest-rated bonds, there remains tremendous uncertainty surrounding the credit metrics for this segment of the market due to the coronavirus and its future impact on the creditworthiness of many lower-rated municipal issuers.

z - Cover Image: Newfleet Tax-Exempt Market Review

The Bloomberg Barclays Municipal Bond Index is a market capitalization-weighted index that measures the long-term tax-exempt bond market. The index is calculated on a total return basis. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.

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.