Perspectives Blog

What’s the outlook for muni bonds?

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

…ew supply and a resurgent demand by investors seeking attractive taxable-equivalent yields. We believe municipal bonds should continue to perform well in the second half of 2014. Yields on muni bonds are compelling when considering the impact of taxes on non-exempt securities. As we reach the halfway point of 2014, it’s a good opportunity to review our full-year outlook for the municipal bond market and consider what the second half of the year…

The perils and pitfalls of buying individual municipal bonds

James Dearborn, Head of Municipal Bonds | February 27, 2014

…er prices Deck is stacked against retail investors With an increasing focus on the benefits of owning municipal bonds — attractive after-tax yields, low historical default rates and relatively low volatility — investors are again considering purchasing individual muni bonds. But the deck may be stacked against the retail investor. The allure of owning individual bonds is found in the set interest payment schedule, the defined maturity date and t…

Why pay a premium for municipal bonds?

Columbia Management Municipal Investment Team, | December 18, 2014

The advantages of buying municipal bonds at a premium What are premium, par and discount bonds? Premium bonds carry a coupon rate that is higher than current market interest rates and have a market value above 100 cents on the dollar. Par bonds carry a coupon rate equal to current market interest rates and trade at or near 100 cents on the dollar. Discount bonds carry a coupon rate that is lower than current market interest rates and trade belo…

Don’t throw the baby out with the bath water – The case for long muni bond funds

Catherine Stienstra, Senior Portfolio Manager | January 29, 2014

Why invest in long-term muni bonds? Why investors should focus on tax-free income and total return Many investors fled the muni market in 2013, as $60 billion in mutual fund redemptions attests. Particularly hard hit were longer-maturity funds, likely due to investors anticipating higher interest rates and the negative impact that would have on fixed-income investments, especially longer bonds. While such concerns appear rational, is avoiding…

Asset allocation — Where does fixed income fit it?

Columbia Management Global Asset Allocation Team, | August 25, 2014

Surprisingly solid returns for bonds in the first half could lead to disappointment in the second half of the year. We continue to believe high-yield bonds are worth holding, especially higher quality ones. Improved country fundamentals and strong technical support favor EM bonds but caution that returns could be less stable in the near term. So far this year, returns on bonds are positive, with longer duration U.S. bonds performing even bette…

2015 Outlook — Same song, slightly different arrangement

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | December 15, 2014

…rates near zero and government bond yields around the world at historic lows, the comparison between stocks and bonds based on forward-looking expected returns has been very lopsided. Market returns in 2014 underscore the valuation advantage that equities offer. (Exhibit 1) Exhibit 1: In 2014, equities outperformed bonds again For this comparison, we use global returns to represent equities but only U.S. returns to represent bonds. This is an u…

The taxman cometh

James Dearborn, Head of Municipal Bonds | March 13, 2014

…T Higher taxes and a growing antipathy toward them are powerful forces behind the renewed interest in municipal bonds. While municipal bonds have performed well since the beginning of the 2014, we continue to believe that they make sense for tax-sensitive, income-oriented investors. After taxes, municipal bonds make sense Today’s municipal bond yields look compelling, especially for high tax bracket investors. If an investor takes the time to de…