Short and Intermediate Duration

Short and Intermediate Duration

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Investment Grade Portfolio Team
SEP 30, 2021

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Public Fixed Income Quarterly Commentary: Fourth Quarter 2020

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Public Fixed Income

Recap: In the third quarter we saw credit spreads remain in a fairly tight range, ending two basis points wider from where they began the quarter and not far above historic lows for the broad credit indices. Despite negative developments with the delta variant, weakness in equities, potential for higher corporate tax rates, growing signs of margin pressures, surprisingly strong new issue activity and the likelihood the Federal Reserve will look to conclude tapering by the middle of next year, the investment grade credit market maintained its resilience as technicals remain strong. By the end of August, the Federal Reserve wrapped up selling all of its remaining bond and ETF holdings in the Secondary Market Corporate Credit Facility, which was introduced at the height of the market meltdown in March 2020, with no discernible impact on spreads. Credit spreads held in well despite the arguably less favorable macro backdrop due to a number of factors in our view. We believe the U.S. market remains a preferred destination for global investors given our market’s attractive all-in yield, liquidity and breadth to foster diversification.