Perspectives Blog

Detroit bankruptcy — One year later

Ty Schoback, Senior Municipal Analyst | August 18, 2014

…e expected to leave G.O. bondholders, not only with a loss, but with a lower recovery than pensioners. Chapter 9 bankruptcy has proven to be an ineffective tool for reducing unfunded pension liabilities, despite the bankruptcy judge’s ruling that pension claims are considered unsecured obligations and subject to impairment within the confines of Chapter 9. In the summer of 2013, Detroit filed the largest municipal bankruptcy in history. One year…

Fear is not a strategy

James Dearborn, Head of Municipal Bonds | November 18, 2013

…cades of financial and economic decline, exacerbated by dysfunctional politics, resulted in the city’s Chapter 9 bankruptcy filing in July. With around 100,000 creditors, including the city’s various pension funds, Detroit is the largest muni bankruptcy in U.S. history. While the filing surprised few muni market participants, news of the bankruptcy and subsequent default heightened uncertainty and investor fear. We believe Detroit’s situation is…

Municipal market ghosts of past, present and yet to come

James Dearborn, Head of Municipal Bonds | December 9, 2013

December 3, 2013 — a seminal day in muni pension discussion. Ghost of Christmas Past – good times were had by all. Ghost of Christmas Present – sobering reality as negotiations continue to go nowhere. Ghost of Christmas Yet to Come – rising above the Detroit debacle. In the annals of public finance history, December 3, 2013, will likely be remembered as a seminal day in which the nature and direction of debate about large unfunded pensio…

Puerto Rico’s credit challenges intensify

Columbia Management Municipal Investment Team, | July 23, 2014

Puerto Rico’s new debt restructuring law led to a Moody’s downgrade. Our assessment of the relative strength of Puerto Rico’s general obligation bonds remains unchanged, as they are not covered by the new law. While we believe that the constitutionality of the new law will be heavily contested, the implications of a voluntary default to revenue bond creditors would be material. In late June, Puerto Rico signed a law that makes it easier…

A primer on preferred securities

Carl Pappo, Head of Core Fixed Income | March 10, 2014

Preferred securities can offer an attractive risk-adjusted yield in a low-yield environment. Straddling the line between fixed income and equity, preferred securities can help diversify core fixed-income portfolios. Investors equipped to analyze and trade these structures are able to find attractive relative value opportunities. Co-authored by Willow Piersol, Senior Analyst As financial institutions raise capital and reduce risk, preferred sec…

Trouble in paradise: Q&A about Puerto Rico bonds

Chad Farrington, CFA, Head of Municipal Bond Credit Research and Senior Portfolio Manager | January 2, 2014

Why has Puerto Rico become such an issue now? Should investors be concerned with a downgrade or default? Is Puerto Rico a systemic risk for the municipal market? Historically, Puerto Rico (PR) bonds’ high yield and triple tax exemption (federal, state and local) had been a big lure for many institutional investors, such as mutual funds. PR debt exposure in municipal bond funds, namely single-state municipal bond funds, proved advantageous for sh…

Three reasons why REITs can continue to rally

Arthur Hurley, CFA, Senior Portfolio Manager | May 19, 2014

REITs have produced attractive returns YTD being up 13.60% through April (up 16% as of May 12) Fundamentals remain solid, demand for commercial real estate remains strong and companies continue to increase dividends. We remain positive on REITs given the relative safety of their income stream and continued prospects for growth. The REIT market shook off the cold of the “polar vortex” with both solid share price performance and continued positi…