Perspectives Blog

Special report – 2014 mid-year review and outlook

Columbia Management, Investment Team | June 16, 2014

…credit quality is improving. Outlook: For the remainder of 2014, we anticipate that, with the strong performance year to date, most of the return opportunity in tax-exempt municipal bonds will be from coupon payments. Beyond attractive taxable-equivalent yields, the technical factors that propelled municipals in the first half of the year are likely to persist through the remainder of 2014, providing stability to the asset class, even if we exper…

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

…of the yield curve in 2013, as the yield on the 30-year AAA muni bond increased by 134 basis points, ending the year at 4.19%. While we expect rates to gradually move higher over the next year, we believe that most of the movement — and damage to long bonds — has already occurred. The resulting higher and steeper curve (see Exhibit 1) has left longer bonds with an attractive risk/reward profile. We believe that muni yields ended the year at comp…

ECB asset purchases — Bazooka or damp squib?

Martin Harvey, Fund Manager, Threadneedle International Ltd | September 22, 2014

…to grow by 0.3% in Q3 (Exhibit 7), which would be welcome. Headline CPI data is also due to edge higher into the year-end. Spot headline inflation is an important determinant of forward-looking inflation expectations (Exhibit 8), and has been affected negatively by the consistent downside surprises in the monthly data this year. If CPI fails to recover above 0.5% before year end, this could have a further detrimental impact. The recent depreciati…

What’s the outlook for muni bonds?

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

…portunity to review our full-year outlook for the municipal bond market and consider what the second half of the year may have in store. While we anticipated that municipal bonds would post positive returns in 2014, year-to-date performance is already better than we imagined was achievable for the entire year. Through the end of May, municipal bonds returned 5.91%, among the best performances of all investment classes. Much of the positive perfor…

The importance of taking a long-term perspective

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | February 3, 2014

…g term outlook for major asset classes We review our forecast for several major asset classes over the next five years Why maintaining realistic expectations for long term asset class performance is so important For asset allocation decisions, we find great value in maintaining a long-term outlook for major asset classes. Twice a year, in fact, we conduct an extensive update of our five-year return forecasts for several asset classes. The purpos…

Does it still pay to hold municipal bonds?

Anders Myhran, Municipal Portfolio Manager | July 29, 2014

…on the blow. Over time however, this negative price return will be mitigated by the ongoing income generated. By year two the 10-year bond is back into positive territory and by the end of year three it has a positive cumulative total return of more than 6%. Exhibit 1: Impact of 100 basis point increase in interest rates 10-year single A-rated muni bond Sources: Barclays, Columbia Management Investment Advisers, LLC. Past performance does not gu…

Q2 fixed income outlook – Hitting for the cycle

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

…mited upside potential and high-yield bonds in which credit risk appears too aggressive. Following weakness last year, emerging market debt has posted gains this 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 e…