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…

Oil and the high yield market

Columbia Management, Investment Team | December 8, 2014

…g. Past performance does not guarantee future results. Valuation and Performance Impact on the Energy Sector and High Yield The impact of lower oil prices has been felt directly by high yield energy bonds and the high yield market.  Since the beginning of September, high yield energy bonds have posted a return of -11.2% and yields widened by 331 basis points (bps). During this same period, the high yield market (including energy) returned -2.6%….

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…

The taxman cometh

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

…T Higher taxes and a growing antipathy toward them are powerful forces behind the renewed interest in municipal bonds. While municipal bonds have performed well since the beginning of the 2014, we continue to believe that they make sense 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 de…

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

…come tax rate is 43.4%, resulting in many investors taking home barely 56 cents of each dollar earned. Municipal bonds can help investors keep more of what they earn, since the income may be exempt from local, state and/or federal income taxes. As tax rates move higher, investments that provide income exempt from taxes, such as municipal bonds, become more appealing. There was a significant increase in rates and steepening of the yield curve in 2…

Asset allocation — Where does fixed income fit it?

Columbia Management Global Asset Allocation Team, | August 25, 2014

…s elsewhere make sense in the context of weaker economic performance, but the prospective returns for government bonds across the globe are now paltry. Exhibit 1: U.S. bond yields relative to G7 bond yields of similar maturity As of June 30, 2014 We remain overweight in high-yield bonds but valuation analysis suggests that returns are likely to be modest going forward, driven primarily by coupon income rather than further spread tightening. Spre…