2016 Fixed Income Markets Outlook


After two consecutive years of significant spread widening for credit sectors and positive projected GDP growth in 2016, fixed income spread sectors offer attractive value and the potential for meaningful total return opportunities. Our “2016 Fixed Income Markets Outlook” presents the opportunities, areas of concern, and possible surprises with upside potential that will guide our management of portfolios in the year ahead.


  • The pace of rate increases and messaging by the Fed will be particularly important for spread sectors. Volatility is likely to persist in 2016 and credit and sector selection will drive returns. We favor an up-in-quality bias over lower-quality situations.

  • Structured finance sectors (asset-backed securities, commercial mortgage-backed securities, and residential mortgage-backed securities) – We anticipate lower volatility for these sectors given that they are less affected by global macro events and recommend an overweight.

  • Corporate high yield – Valuations are attractive, driven by the problem industries of metals & mining and energy, but also by other industries that have followed them down.

  • Bank loans – Loans are attractive on a risk-adjusted relative basis, but may experience continued price volatility consistent with other risk asset classes.

  • Emerging markets and non-U.S. dollar-denominated bonds – Opportunities for these segments of the market may be a second half of 2016 event. We advocate a highly selective approach and favor countries with improving or stable fundamentals.

  • Our in-depth credit research and multi-sector approach will enable us to quickly identify and take advantage of possible surprises with upside potential. In an environment of rising default rates, we will seek to capitalize on volatility and new opportunities.

Read Newfleet’s 2016 Outlook

Past performance is not a guarantee of future results.

Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.