Perspectives Blog

The coming divide in state credit quality

Ty Schoback, Senior Municipal Analyst | June 3, 2014

…gains taxes. A number of states have managed such growth with exceptional prudence – states we deem to be fiscal leaders – and are now in the enviable position of debating what to do with newfound budget surpluses. In particular, two states stand out: California, which was being compared to Greece just a few years ago, and Michigan, which has shown significant fiscal improvement in the face of much-maligned local government credit we…

Release the doves

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | October 20, 2014

…e economy as the U.S. financial crisis and recession deepened. The measures also fell below zero during the U.S. fiscal cliff crisis in 2012, signaling the potential deflationary impact of immense tax hikes hitting demand. In both those instances, the Fed leaned in and accelerated QE and balance sheet expansion to counter those forces. Exhibit 1: TIP breakevens So we should take notice when short-term TIP breakevens fall and begin to turn negati…

Rebalancing the U.S. economy

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

…traction. All involve some rebalance in the economy toward normalization. The first is policy normalization—both fiscal and monetary. The economy has been weighed down to varying degrees by a huge fiscal drag from earlier year tax hikes that hit households 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)….

Puerto Rico’s double-downgrade

Michael Taylor, Senior Municipal Analyst | February 10, 2014

…ite moves by the current Administration to bolster liquidity and come closer to structural budgetary balance for fiscal year 2015. At Columbia Management, we have acknowledged Puerto Rico’s credit challenges for a very long time — largely due to our opinion that there is no easy way for the government to spark economic growth and enact meaningful fiscal reform, as well as our understanding that a bailout from the Federal government has not been o…

U.S. rates – Headwinds

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

At this week’s meeting, the Federal Open Market Committee looks likely to rework its forward guidance for short-term interest rates once again. We expect revised forward guidance to lean heavily on the idea of “headwinds”; this is a stand-in term for a low equilibrium real rate. We expect that the new guidance will make three main points: (1) that the FOMC is in no hurry to raise rates, (2) that rate hikes can proceed gradually once…

When the QE tide recedes, focus on what is revealed

Robert McConnaughey, Director of Global Research | January 6, 2014

Monetary stimulus from central banks can no longer be counted on to lift asset prices For 2014 we see a market with lower cross-correlations and more divergent investment outcomes Finding alpha opportunities requires in-depth global research to take advantage of market inefficiencies While there is fierce debate on the ultimate effectiveness of monetary stimulus surging from the central banks, one cannot dispute the boost that it has given to…

Tri-state pension reforms result in improvements

Matt Stephan, Analyst, Tax-Exempt Fixed-Income Research | April 11, 2014

…should lower unfunded liabilities in the long-term, provided various actuarial assumptions are met. Sources: Fiscal 2013 State CAFRs, Fiscal 2014 State Budgets, Fiscal 2015 Proposed State Budgets There are risks associated with an investment in a municipal bond fund, including credit risk, interest rate risk, prepayment and extension risk, and geographic concentration risk. See the Fund’s prospectus for information on these and other risks as…