Perspectives Blog

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…

Compelling opportunity in municipal bonds

Catherine Stienstra, Senior Portfolio Manager | November 7, 2013

…reversed course, increasing 2.15%, as market fears faded, issuance slowed further and investors took advantage of opportunities to lock in especially attractive interest rates. Spreads widened in lower quality and high-yield securities, as Detroit, Puerto Rico and Illinois pension problems crowded the headlines. Headlines aside, these issues are not representative of the broad municipal market, and the number of municipal defaults is at its lowe…

Credit alternatives in government-backed debt

Columbia Management, Investment Team | June 23, 2014

…d a historically low level. One way investors may boost yields without taking on undue credit risk is through government agency debt, which fills a niche in the market between high-quality spread product and low-risk Treasury securities. Through explicit or implicit guarantees, timely principal and/or interest on agency debt ultimately may be backed by the U.S. government. Many investors associate U.S. agency debt with very low yields; indeed, th…

Flexible income strategies — Avoiding side effects from the Fed’s medicine

David King, CFA, Senior Portfolio Manager | August 11, 2014

…l under 2%. Free markets have a way of trying to resolve economic imbalances, such as the side effect of current Fed policy. As you read this article, assume that investment bankers all over the world are trying to devise new securities that will raise money for worthwhile business projects while providing an income stream to yield-starved financial investors. This is good news, but how can an individual investor participate in this problem-solvi…

New taxes require strategies to maximize after-tax return

Abram Claude, Vice President, Columbia Management Learning Center | March 18, 2014

…The tax tail should not wag the investment dog. But there are steps that investors can take to improve after-tax returns by mitigating the additional tax bite that began in 2013. Managing the differential in tax treatment of securities through asset location Investors with sizeable investments in taxable accounts, especially investors who are still working and are not currently living on their investments, should consider a strategy for shelteri…

What’s the outlook for muni bonds?

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

Strong YTD performance resulted from falling rates, a dearth of new 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 m…

The perils and pitfalls of buying individual municipal bonds

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

…2-2013 YTD) Source: Goldman Sachs, December 27, 2013 Ratings — Stale and often volatile ratings leave individual investors at risk Individual investors typically rely on the rating agencies to determine the credit quality of securities they are considering for purchase. Unfortunately, these ratings, especially for secondary market purchases, are often stale. In addition, the ratings may be volatile due to agency rating recalibrations as well as…