Perspectives Blog

Credit alternatives in government-backed debt

Columbia Management, Investment Team | June 23, 2014

…ads of 30–35 bps over Treasuries, while higher quality financial institutions trade around 50 bps. Export-Import Bank of the United States The Export-Import Bank of the United States, established in 1934, assists in financing the export of U.S. goods to international markets when private lenders are unable or unwilling to accept the risk. The Ex-Im Bank provides working capital guarantees, export credit insurance, loan guarantees and direct loans

Gut check: The outlook on fixed income

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

…coupon-like returns, which is better than last year but nothing to brag about. Do we prefer high-yield bonds or bank loans? High-yield bonds. High-yield bonds and bank loans were the only two winning sectors in fixed income in 2013 with returns of 7% and 5%, respectively. We are comfortable holding our current positions in high yield and bank loans, but not adding. Corporate fundamentals remain strong, which is supportive of both asset classes….

Is Europe heading for Japanese-style deflation?

Martin Harvey, Fund Manager, Threadneedle International Ltd | August 4, 2014

…line. Cultural factors also contributed to the gradual pace of Japan’s economic demise. Specifically, within the banking system, bad loans were not realized in a timely fashion in Japan and were simply rolled over, leading to the build-up of so-called “zombie companies.” Consequently, as banks were not realizing losses in a timely fashion, the subsequent recapitalization of banks that should have occurred was absent, slowing the recovery process….

Quality milestone in the European recovery story

March 17, 2014

…es in Europe. We favor domestic European plays over internationally-exposed stocks, with an overweight stance in banking and telecoms. By Paul Doyle, Head of Europe ex. UK equities and Frederic Jeanmaire, Fund Manager, Threadneedle Investments After 18 consecutive negative months, the flow of eurozone bank loans into the private sector finally turned positive in January. This marks a milestone on the path towards Europe’s economic recovery. The…

How bad is China’s credit crisis?

Weili Jasmine Huang, Senior Portfolio Manager | February 3, 2014

…years, China’s trust sector has been one of the fastest growing types of non-bank credit, or “shadow banking” credit, to circumvent the government’s bank loan quota system. Currently, overall trust assets are about Rmb 10 trillion (US$1.7 trillion), accounting for 7% of China total banking assets. It is estimated that 50% of trust loans relate to local government financial vehicles (LGFVs) and 20% to the property sector. To some…

Could a 529 plan help you pay less for college?

Columbia Management, Investment Team | May 22, 2014

…naging the cost of higher education. Saving in advance could offer a significant cost savings compared to taking loans during college. Use our 529 Savings vs. Loans Calculator to run your own personalized estimate. Saving for college early on can greatly benefit you in the long run. By saving in an investment vehicle such as a 529 college savings plan, you may be able to avoid relying on loans or taking from your cash flow in the future to make…

Missing links and multipliers

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | June 9, 2014

…student debt. This was underscored recently by a New York Fed study* which showed that young people with student loans were much less likely to invest in houses than those without loans, which is a reversal of pre-recession trends. They believe this is one reason why the housing recovery has not been stronger. When you restrict credit in the midst of a 100 basis point rise in interest rates and a 13% jump in home prices, affordability is invariab…