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Virtus Viewpoints - Q3 Newfleet Tax-Exempt

Municipal Bonds – Taxable Issuance Continues to Drive Supply

Despite all the headline news surrounding the COVID-19 pandemic, the election, and natural disasters, the municipal bond market provided solid performance for the third quarter. The Bloomberg Barclays Municipal Bond Index returned 1.23% for the three months ending September 30, bringing the year-to-date return to 3.33%. This has been a tremendous turnaround from mid-March when the municipal bond market was down over 7.60%. Despite growing credit concerns, municipal yields have largely returned to pre-pandemic levels and lower-rated bonds outperformed higher quality bonds for the quarter. That said, the highest quality bonds have proven to be the best performers year to date, and we continue to believe that higher quality municipal bonds offer reasonably good relative value given the tremendous uncertainty regarding the market due to the coronavirus and its future impact on the creditworthiness of many lower-rated municipal issuers.

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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.