Perspectives Blog

A primer on preferred securities

Carl Pappo, Head of Core Fixed Income | March 10, 2014

Preferred securities can offer an attractive risk-adjusted yield in a low-yield environment. Straddling the line between fixed income and equity, preferred securities can help diversify core fixed-income portfolios. Investors equipped to analyze and trade these structures are able to find attractive relative value opportunities. Co-authored by Willow Piersol, Senior Analyst As financial institutions raise capital and reduce risk, preferred sec…

Credit alternatives in government-backed debt

Columbia Management, Investment Team | June 23, 2014

…t agency debt, which fills a niche in the market between high-quality spread product and low-risk Treasury securities. Through explicit or implicit guarantees, timely principal and/or interest on agency debt ultimately may be backed by the U.S. government. Many investors associate U.S. agency debt with very low yields; indeed, the U.S. agency sector in the Barclays Aggregate Index — made up largely of Fannie Mae, Freddie Mac and Federal Home Loan…

Duration for diversification

Columbia Management, Investment Team | November 19, 2013

…Index (S&P 500 Index) is an unmanaged list of common stocks that includes 500 large companies. The Barclays U.S. Aggregate Index is an index comprising approximately 6,000 publicly traded bonds, including U.S. government, mortgage-backed, corporate and Yankee bonds with an average maturity of approximately 10 years. The index is weighted by the market value of the bonds included in the index. This index represents asset types that are subject…

Compelling opportunity in municipal bonds

Catherine Stienstra, Senior Portfolio Manager | November 7, 2013

…reversed course, increasing 2.15%, as market fears faded, issuance slowed further and investors took advantage of opportunities to lock in especially attractive interest rates. Spreads widened in lower quality and high-yield securities, as Detroit, Puerto Rico and Illinois pension problems crowded the headlines. Headlines aside, these issues are not representative of the broad municipal market, and the number of municipal defaults is at its lowe…

New taxes require strategies to maximize after-tax return

Abram Claude, Vice President, Columbia Management Learning Center | March 18, 2014

…The tax tail should not wag the investment dog. But there are steps that investors can take to improve after-tax returns by mitigating the additional tax bite that began in 2013. Managing the differential in tax treatment of securities through asset location Investors with sizeable investments in taxable accounts, especially investors who are still working and are not currently living on their investments, should consider a strategy for shelteri…

What’s the outlook for muni bonds?

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

Strong YTD performance resulted from falling rates, a dearth of new supply and a resurgent demand by investors seeking attractive taxable-equivalent yields. We believe municipal bonds should continue to perform well in the second half of 2014. Yields on muni bonds are compelling when considering the impact of taxes on non-exempt securities. As we reach the halfway point of 2014, it’s a good opportunity to review our full-year outlook for the m…

Rates rise, convertibles do what?

David King, CFA, Senior Portfolio Manager | August 9, 2013

There is a very common concern that convertible securities will not perform well in a rising interest rate environment. Analysis of past rising rate periods shows that convertible returns have been neutral or positive as long as stock returns were positive. Accordingly, we do not see concern about rising interest rates alone as a good reason to avoid convertible securities. There is a very common concern that convertible securities will not pe…