Taxable Fixed Income 3Q21 Market Review & Outlook

October 11, 2021 — Core bond markets will likely remain under pressure into year-end, with yields grinding higher as markets prepare for tapering and eventual hikes; however, we don’t foresee a large sell-off or deeply negative returns over the next few quarters. For diversified fixed income investors, we expect strong fundamentals, robust earnings, and high liquidity to support spread levels. While there will be periods of negative returns as rates rise, over past tightening cycles core fixed income has typically seen modest positive returns on an annualized basis, especially in actively managed allocations.