Perspectives Blog

Are municipal bond rating agencies shifting the goalposts (again)?

Columbia Management Municipal Investment Team, | September 30, 2013

In 2010, public ratings agencies upgraded en masse, or “recalibrated,” tens of thousands of municipal bonds without without a formal review of each obligor’s underlying credit characteristics. Recently, Moody’s and S&P announced new revisions to their General Obligation (GO) rating methodologies. S&P’s revision is anticipated to result in an upward migration of their local GO ratings (60% unchanged, 30% upgraded, 10% downgraded), while…

The case for active muni management

Kimberly Campbell, Senior Portfolio Manager | April 21, 2014

…cially in today’s unpredictable investment environment. Actively managed portfolios provide investors with the opportunity to outperform their benchmarks by relying on the investment expertise of a team of portfolio managers, credit analysts and traders. The investment team provides clients vital investment expertise, critical issuer selection and risk oversight to avoid credit minefields. On the security selection level, portfolio managers analy…

The perils and pitfalls of buying individual municipal bonds

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

…par. While these may be valid reasons to choose an individual security over a mutual fund, the environment for purchasing individual bonds has become much less friendly for retail investors. The combination of reduced supply, credit uncertainty, rating agency volatility and a pricing structure that favors large institutional investors has put the retail investor at a disadvantage. Supply — Anemic new issue supply leaves investors starved for bond…

How bad is China’s credit crisis?

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

We look at the scope and impact of China’s credit crisis We believe the possibility of a financial meltdown is low We discuss how resolution of the crisis may unfold News of a trust product on the brink of default has deepened the concerns of increasing instability of China’s financial system. The risk of defaults on trust and wealth management products will likely continue to impact markets. We believe that the shadow banking issue will…

Gimme credit

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | August 22, 2013

…ittle to suggest any acceleration in consumer spending. We need to keep in mind that the consumer’s ability to advance spending is mainly tied to gains in income and wages this cycle—which have remained very sub-par. Consumer credit has had little impact on the current recovery. Over 90% of the current cycle consumption growth is explained by growth in incomes and wages, well north of the 60% historical correlation seen in the prior 25 years. Aft…

Puerto Rico’s turbulent ride

Michael Taylor, Senior Municipal Analyst | September 26, 2013

Puerto Rico’s economic contraction and fiscal decline is persistent, well-documented and widely acknowledged within the municipal marketplace. For Puerto Rico, continued access to affordable capital remains imperative for the maintenance of fiscal operations, liquidity, and maintaining investment-grade agency credit ratings. We maintain the opinion that investing in Puerto Rico municipal bonds remains appropriate only for investors who can tole…

Opportunity in lower-quality municipals

Columbia Management, Investment Team | August 15, 2013

Recently enacted higher tax rates — and the threat of even higher rates — enhance the attractiveness of tax-exempt income, especially versus other income-producing securities. Lower quality, shorter maturity investment-grade municipal bonds may provide similar yields as longer maturity bonds, but with lower interest-rate risk and volatility. Independent and well-resourced credit research is a critical tool in lower-quality municipal bond invest…