Perspectives Blog

Oil and the high yield market

Columbia Management, Investment Team | December 8, 2014

By Jennifer Ponce de Leon, Senior Portfolio Manager and Head of High Yield and Mark Van Holland, CFA, Senior Portfolio Manager  Size of the Energy Sector Because the energy sector is a large component of the U.S. high yield market relative to some other asset classes, the market has received increased scrutiny due to recent declines in oil prices. Prior to the recent sell off, energy accounted for more than 15% of the high yield market, making i…

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 —…

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

Columbia Management, Investment Team | December 1, 2014

…your bond fund can help shed light on the amount and kinds of risks the fund is taking. Is the fund earning its yield by investing in riskier below-investment grade bonds, through riskier sectors or longer maturity bonds? Remember, there is no free lunch. Higher yield generally means higher risk. In this low and uncertain interest rate environment, how can conservative investors stay invested, avoid excess interest rate or credit risk and still…

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…

Are financial markets priced for secular stagnation?

Columbia Management, Investment Team | December 15, 2014

…such, it is not obvious that spreads are discounting a period of secular stagnation, and if this were to unfold, higher quality credit would likely attract significant further allocation driving yield spreads lower. It is true that the risk-absorbing capacity of investment banks has been regulated away; so it is up for debate as to whether investors should demand a higher level of liquidity premia than in a previous era. But notwithstanding this…