Perspectives Blog

Hungry for income? High yield munis could be your meal ticket

Chad Farrington, CFA, Head of Municipal Bond Credit Research and Senior Portfolio Manager | May 28, 2014

High yield muni bonds represent an attractive investment opportunity Professional money managers can help with the intricacies of the high yield muni space Current income and potential tax advantages in the high yield space Attractive yields, potential for price appreciation Many investors are concerned about the prospect of rising interest rates and the impact higher rates may have on bonds, especially since we’ve been in a very low rate envi…

What’s the outlook for muni bonds?

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

…justify tighter credit spreads, especially relative to more volatile taxable fixed income alternatives, such as high-yield and investment-grade corporate bonds. While rates may in fact move higher later this year, we believe that even in such an environment, municipal bond investors will enjoy higher after-tax total returns with the promise of relative outperformance compared to other fixed income investment options. Taxable-equivalent yields —…

Gut check: The outlook on fixed income

Colin J. Lundgren, CFA, Head of U.S. Fixed Income | February 24, 2014

…by concerns about possible future Fed rate hikes. We aren’t there, yet — and a move by the Fed before 2015 seems highly unlikely — but similar to the tapering trade, expect bonds to re-price well in advance of any Fed action. An important difference in the next big move in rates is that it will likely take place in shorter maturities rather than long maturities. In bond jargon, we expect the yield curve to flatten. Has the outlook for high qualit…

Finding the sweet spot — Value investing along the muni yield curve

Paul Fuchs, CFA, Portfolio Manager, Municipal Bonds | August 27, 2014

…s. As bonds age, or become shorter in maturity, they are evaluated at lower interest rates, provided the overall yield environment has not changed and the yield curve is upward sloping. Historically, the municipal yield curve has been upward sloping the vast majority of time. Evaluating a bond at a lower yield will result in a higher price. Roll-down analysis attempts to identify the sweet spot on the curve: the area that offers the most incremen…

Has dividend investing lost its luster?

Columbia Management, Investment Team | May 12, 2014

…ersing what had been a relatively unique phenomenon—yields on equities that exceeded longer-term government bond yields. Uncertainty about the Federal Reserve’s quantitative easing policies and potential acceleration of the U.S. economy fueled both rising rates and rate volatility last year. When combined with the reversal in equity market yield premiums relative to bonds, higher-yielding equities underperformed the market causing some to questio…

The taxman cometh

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

…nse for tax-sensitive, income-oriented investors. After taxes, municipal bonds make sense Today’s municipal bond yields look compelling, especially for high tax bracket investors. If an investor takes the time to determine how much more one has to earn on a taxable fixed income investment to be equal with a tax-free municipal bond — after paying taxes — she will realize how attractive muni bonds are. In Exhibit 1, we compare municipal yields, adj…

From tactical to core – The case for emerging market debt

Columbia Management, Investment Team | June 2, 2014

…ial crisis have all but disappeared. However, investors now need to look beyond corporate credit for incremental yield, and we believe that emerging market debt (EMD) offers an attractive, high-quality alternative. Emerging market debt is largely investment grade Hard currency EMD, i.e. bonds issued in U.S. dollars, is effectively a credit asset class and spreads (the yield premium) over U.S. Treasury bond yields can be more directly compared to…