Perspectives Blog

Fixed income strategies – The pros and cons of generating returns with negative duration

Columbia Management, Investment Team | July 14, 2014

Unconstrained multi-sector bond funds have become very popular due to their flexibility to invest tactically across sectors and manage interest rate sensitivity. While it may be useful for a fixed income manager to employ a negative duration strategy, getting the timing right can be very challenging. With interest rates defying expectations so far in 2014, investors need to ask what should be at the core of their fixed income portfolio. By Kri…

Duration for diversification

Columbia Management, Investment Team | November 19, 2013

Many investors struggle to determine the appropriate amount of bond duration in an environment of rising interest rates. The right amount of duration has to be considered in a portfolio context, because the main value of duration exposure comes through diversification. Because of the negative correlation between duration and the returns of riskier assets, high-quality fixed income will still be a cornerstone of any disciplined portfolio. By Za…

From tactical to core – The case for emerging market debt

Columbia Management, Investment Team | June 2, 2014

…hat need to be considered when assessing the relative value between the two asset classes. For example, EMD volatility has been much higher than other spread sectors due in part to the EM bond market being a relatively longer duration asset class compared to most other higher beta credit sectors. This additional sensitivity to interest rates in an environment of rising bond yields over Q2 and Q3 2013 was an unwelcome feature which was then reflec…

U.S. rates — View update

Zach Pandl, Portfolio Manager and Strategist | April 4, 2014

Compared to the market consensus, our views have been more negative on three key duration fundamentals. Following recent remarks by Fed Chair Janet Yellen, we are now less confident about how to read Yellen’s policy strategy. We are still expecting higher rates; however, we now have less conviction that 3-5yr Treasuries will continue to underperform on the curve. For the last couple of months we have argued that portfolios should remain underw…

Q2 fixed income outlook – Hitting for the cycle

Gene Tannuzzo, CFA, Senior Portfolio Manager | March 31, 2014

…s year, and we expect further strength ahead as volatility subsides. While we expect a flatter yield curve over the next few months as investors focus on the timing and pace of rate increases, we don’t think they should avoid duration altogether. By the middle of this year, the economic expansion in the U.S. will officially turn five years old. By comparison, the average of all business cycle expansions tracked by the National Bureau of Economic…

What should U.S. bond investors expect in 2014?

Zach Pandl, Portfolio Manager and Strategist | January 6, 2014

The timing of the Fed’s QE exit is no longer the central question An accelerating economy could mean another challenging year for duration risk A major question is whether markets begin to doubt the Fed’s commitment to low rates If bond investors were asked to summarize 2013 in a single word, we suspect that many would pick “taper.” The question of when the Federal Reserve (the Fed) would begin dialing back quantitative easing (QE) dominated m…

The case for active muni management

Kimberly Campbell, Senior Portfolio Manager | April 21, 2014

…, critical issuer selection and risk oversight to avoid credit minefields. On the security selection level, portfolio managers analyze each security’s characteristics — issuer, credit quality, sector, coupon, yield, maturity, duration, call features — in addition to current market fundamentals and technicals, to determine which securities are most likely to outperform, or underperform. Credit analysts provide their independent, fundamental bottom…