Perspectives Blog

Sizing up the fixed income market

Colin J. Lundgren, CFA, Head of U.S. Fixed Income | September 29, 2014

For the right sized asset manager, disruptions in the fixed income market can create short-term opportunities. Liquidity has deteriorated in recent years and can escalate when a mega manager needs to sell a large position. The case for exercising caution around interest rates is strong, but investors shouldn’t paint all bonds with the same brush. Fixed income investors face some big challenges — low and potentially rising interest rates, poor…

The case for active bond management

Carl Pappo, Head of Core Fixed Income | August 25, 2014

There have been instances where the passive approach to bond investing produced significant underperformance relative to a benchmark. Index funds are at a significant disadvantage to active portfolios in which managers incorporate valuation into their decision making process. The many nuances and inefficiencies of the fixed income market create both difficulties for indexing and opportunities for active management. Co-authored by Michael W. Za…

Credit alternatives in government-backed debt

Columbia Management, Investment Team | June 23, 2014

One way investors may boost yields without taking on undue credit risk is through U.S. government agency debt. While many investors associate U.S. agency debt with very low yields, other types of agency debt can offer significant spreads to Treasuries with a modest decline in liquidity. We have been increasing our allocation to the agency market in core portfolios as a way to reduce credit risk while maintaining competitive yields. By Carl W….

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…