Perspectives Blog

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

…o’s financial problems have been simmering for decades. The Commonwealth has an ailing economy, recurring budget deficits and severely underfunded pension systems. Unlike most other municipalities, PR issues debt to pay annual operating expenses. The chart on the following page provides a snapshot of Puerto Rico’s unrestricted net asset deficit — accrued over years and running annual operating deficits — and the percent of funding for the governm…

The case for active bond management

Carl Pappo, Head of Core Fixed Income | August 25, 2014

There have been instances where the passive approach to bond investing produced significant underperformance relative to a benchmark. Index funds are at a significant disadvantage to active portfolios in which managers incorporate valuation into their decision making process. The many nuances and inefficiencies of the fixed income market create both difficulties for indexing and opportunities for active management. Co-authored by Michael W. Za…

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…

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

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

In today’s low interest rate environment, investors with cash on hand and a limited appetite for risk aren’t having an easy time growing their wealth. The Fed’s strong influence throughout the government and corporate bond markets makes it hard to find attractive fixed-income instruments of low or moderate risk. To increase an investor’s chances of success, an investment strategy needs the flexibility to look beyond the most visible asset class…

Rebalancing the U.S. economy

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | January 13, 2014

…eholds and from spending cuts by federal and state governments. While painful, these cuts have rebalanced budget deficits. A year ago, the U.S. budget deficit was 6.5% of gross domestic product (GDP). It will likely fall to less than 4% of GDP in last year’s fourth quarter and looks to decline to something near 3% this year. Receipts are up 13% and outlays are down 5.5% in the last year—this is admirable progress. The easing fiscal drag will add…

From tactical to core – The case for emerging market debt

Columbia Management, Investment Team | June 2, 2014

For many investors, emerging market debt could be viewed as a core-portfolio holding rather than a short-term tactical investment. 2013’s re-pricing created value in terms of higher yields, a more dedicated investor base and a better relative value argument. Flexibility across the full spectrum of EMD investment opportunities is extremely important, as emerging markets are not homogenous. By Patrick McConnell, Director, Fixed Income Product Ma…