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Virtus Viewpoints | Seix Market Review & Outlook – Investment Grade

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Written by:
Investment Grade - Taxable
James F. Keegan, Chief Investment Officer and Chairman
Perry Troisi, Managing Director, Senior Portfolio Manager

Investment Grade - Tax-Exempt
Ronald F. Schwartz, CFA
Dusty Self, Managing Director, Senior Portfolio Manager

The third quarter saw a continued lack of market volatility, still-low long-term interest rates, and minimal progress on President Trump’s pro-growth legislative agenda. In the investment grade-taxable market, spread sectors continued to benefit from the insatiable search for yield, producing positive excess returns across both the investment grade and sub-investment grade markets once again.

In the tax-exempt municipal bond market, limited supply and healthy demand has driven strong performance this year. As issues regarding tax reform are debated, more and more investors may stay on the sidelines until some clarity emerges.


Quarter Three – More of the Same

Coming into 2017, the expectation was that long term rates would rise, the yield curve would steepen, the monetary authorities would pass the baton to fiscal authorities, and great progress would be made on tax reform, the repeal and replacement of Obamacare, regulatory reform, and infrastructure spending. In a rising rate environment, volatility would pick up and the dollar would continue to rise. There was even talk of the euro going to parity versus the U.S. dollar. The consensus is generally wrong but this year the miss is pretty remarkable.

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