Perspectives Blog

The taxman cometh

James Dearborn, Head of Municipal Bonds | March 13, 2014

…d category of investment income it is levied against. For higher income taxpayers, these changes may drive their federal tax rate from a 2012 high of 35% to a 2013 and beyond high of 43.4% (a 24% increase). Note that state and local taxes are in addition to federal taxes. For investors facing the unpleasantness of having to write a check to cover these higher levies, please keep in mind that municipal bond interest income is: subject to neither…

What’s the outlook for muni bonds?

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

…10-year) and Barclays, as of May 31, 2014. Past performance does not guarantee future results. * Assumes a 2014 federal income tax rate of 43.4% (39.6% income tax rate + 3.8% Net Investment Income Tax rate). Other taxes are possible. The effect of potential federal income tax phase outs of personal exemptions and itemized deductions is excluded from this schedule. Had they been included, the reported tax rate would have been higher which would t…

QE worked, but not as advertised

Zach Pandl, Portfolio Manager and Strategist | November 3, 2014

…upplies of various assets available to private investors may affect the prices and yields of those assets. Thus, Federal Reserve purchases of mortgage-backed securities (MBS), for example, should raise the prices and lower the yields of those securities; moreover, as investors rebalance their portfolios by replacing the MBS sold to the Federal Reserve with other assets, the prices of the assets they buy should rise and their yields decline as wel…

Special report – 2014 mid-year review and outlook

Columbia Management, Investment Team | June 16, 2014

…est rates reflect renewed pessimism about the global economic recovery, as well as easy monetary policy from the Federal Reserve, European Central Bank and Bank of Japan. Outlook: The U.S. economy has made considerable progress in the five years since the recession ended. Inflation, unemployment and broader measures of labor utilization have all moved closer to the Federal Reserve’s targets. Against this macroeconomic backdrop, interest rates in…

Rebalancing the U.S. economy

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

…stock and financial assets to GDP appear extended on a historical basis. For instance, looking at data from the Federal Reserve’s (the Fed) quarterly Flow of Funds report, the total worth of financial assets owned by households is at its highest ratio ever compared to GDP (see chart 1). Most of the gains in financial assets have been from equities, mutual funds and pension reserves. They appear about 12% higher than their average over the last 2…

Do you know what’s in your short-term bond fund?

Columbia Management, Investment Team | December 1, 2014

…r, CFA, Senior Portfolio Manager and Catherine Stienstra, Senior Portfolio Manager, Municipal Bonds Now that the Federal Reserve (the Fed) has ended its Quantitative Easing (QE) program, what is next for interest rates and fixed-income investments?  Many investors expect the Fed to begin raising short rates sometime in 2015. Consequently, they are cautious in their asset allocations, maybe shying away from fixed-income investments. Regardless of…

U.S. rates – Headwinds

Zach Pandl, Portfolio Manager and Strategist | March 17, 2014

…ept: the short-term equilibrium real rate (also known as r*). The specific definition for this variable that the Federal Reserve uses in its Blue Book is the real interest rate that closes the output gap in three years, given a certain model’s forecast for the economy. Conceptually, if the funds rate is above the equilibrium rate monetary policy should be considered “tight”, and if the funds rate is below the equilibrium rate, monetary policy sho…