Perspectives Blog

Credit alternatives in government-backed debt

Columbia Management, Investment Team | June 23, 2014

One way investors may boost yields without taking on undue credit risk is through U.S. government agency debt. While many investors associate U.S. agency debt with very low yields, other types of agency debt can offer significant spreads to Treasuries with a modest decline in liquidity. We have been increasing our allocation to the agency market in core portfolios as a way to reduce credit risk while maintaining competitive yields. By Carl W….

What’s the outlook for muni bonds?

James Dearborn, Head of Municipal Bonds | June 19, 2014

…hem outperform Treasuries. These supports include a dearth of new supply, with issuance down more than 25%; a resurgent demand bred of investor appetite for attractive taxable-equivalent yields, compared to other fixed-income alternatives; and a grudging acceptance by retail investors that municipal credit quality is improving. Given the year-to-date outperformance of tax-exempt bonds, should investors look for greener investment pastures elsewhe…

Hungry for income? High yield munis could be your meal ticket

Chad Farrington, CFA, Head of Municipal Bond Credit Research and Senior Portfolio Manager | May 28, 2014

…yield municipal bonds, with their high yields and opportunity for price appreciation, are one segment of the market worth considering. Municipal credit trends are stable to improving, the yield exceeds most other fixed-income alternatives and the tax environment makes the tax-exempt benefit even more valuable. We believe a stronger economy is what is most likely to spark inflation and will ultimately lead to higher interest rates. Since many high…

Predicting new drug sales is more art than science

Harlan Sonderling, CFA, Senior Healthcare Analyst | April 14, 2014

…indications beyond its initial one, and can the product win regulatory approval across geographies? We interact regularly with both doctors/scientists and payers; the former on drug mechanisms, side effects, patient need and alternatives, and the ease of administration relative to other therapies; the latter on their interpretation of novelty (whether the drug fills an unmet need or represents a significant improvement, and at what perceived cos…

Has dividend investing lost its luster?

Columbia Management, Investment Team | May 12, 2014

…payout ratios remaining low by historical standards, we believe dividend growth will continue to be strong. In our view, high-yielding equities will continue to provide strong total returns especially relative to fixed income alternatives. U.S. equity markets rose more than 30% in 2013 as investors anticipated accelerating corporate earnings. For the year, S&P 500 operating earnings rose by 10.8% with P/E multiple expansion accounting for the…

Gut check: The outlook on fixed income

Colin J. Lundgren, CFA, Head of U.S. Fixed Income | February 24, 2014

…co) and persistent outflows. But the underperformance of the sector appeared excessive to us. Any fixed income asset class that has duration warrants some caution, but intermediate- and high-yield muni funds may be attractive alternatives with less rate sensitivity. The headlines are not trivial — especially Puerto Rico — but we do not think the issues are widespread as most state and local finances appear on the upswing. Finally, we would agree…

Finding opportunity in Chinese reforms

Robert McConnaughey, Director of Global Research | June 16, 2014

…otential disruption. One area where reform is clearly taking shape is the environment. China will continue to burn large quantities of coal for years to come, but significant action is occurring to diversify into natural gas, alternatives, and to burn coal in less polluting/more efficient ways. Interestingly, one of the barriers to really exploiting China’s shale potential is water scarcity. Managing water resources in China will be a massive cha…