Global Fixed Income Strategy Jan 2018

Monthly insights and updates from the Invesco Fixed Income team.

Jan 31, 2018 | Invesco Fixed Income

Historic US tax reform signed into law in the final days of 2017 will likely have far reaching effects on the US economy and financial markets. In the Global Macro Strategy section, below, we highlight Invesco Fixed Income’s (IFIs) views on the new law’s macro implications. In the Global Credit Strategy section that follows, we provide an overview of its impact on three major fixed income asset classes: investment grade, high yield and municipal bonds.

Major changes under US tax reform

Details of the wide ranging tax changes are still emerging, but a few key provisions are likely to influence future macro and asset class performance:
• Decreases in personal income tax rates
• Decrease in the corporate tax rate to 21% from 35%
• Reduction in corporate interest deductibility from 100% to a limit of 30% of EBITDA (earnings before interest, taxes, depreciation and amortization) for the first four years and 30% of earnings before interest and taxes thereafter
• Reduction in the corporate repatriation tax from 35% to 15.5% on liquid assets and 8% on illiquid assets

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