Perspectives Blog

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

Columbia Management, Investment Team | December 1, 2014

High-quality short-term bond funds can provide attractive returns for investors seeking a conservative investment option in today’s uncertain interest rate environment. Not all short-term bond funds are created equal. Some managers take reasonable, well-diversified risks; others may be tempted to chase yield, with the results being risks that may exceed investor tolerance. Know what you own! By Leonard Aplet, CFA, Head of Short-Duration Fixed…

A port in the storm — Short muni funds can offer refuge in the face of rising rates

Catherine Stienstra, Senior Portfolio Manager | October 2, 2014

…as played out, we understand why investors remain hyper-cautious about the impact rising rates may have on their bond investments, particularly with interest rates hovering near 14 month lows and the significant year-to-date outperformance of long muni bonds. Admittedly, there are conditions in place that could anchor interest rates at low levels for some time, namely comparatively lower eurozone rates, dormant wage and price inflation, and intra…

Interpreting the bond rally from a multi-asset perspective

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | June 2, 2014

…ework for identifying capital market states can help set expectations for markets in the aftermath of the recent bond rally. Our framework suggests a highly bullish market state for equities although that market state would shift to bearish if conditions became more neutral. While we expect ongoing strength in equities (which should pressure bond markets and drive yields higher), the durability of strong performance in risk asset markets will be…

2015 Outlook — Same song, slightly different arrangement

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | December 15, 2014

…t advantage over other asset classes based on valuation. With short-term interest rates near zero and government bond yields around the world at historic lows, the comparison between stocks and bonds based on forward-looking expected returns has been very lopsided. Market returns in 2014 underscore the valuation advantage that equities offer. (Exhibit 1) Exhibit 1: In 2014, equities outperformed bonds again For this comparison, we use global ret…

Q3 fixed income outlook – The demise of volatility

Gene Tannuzzo, CFA, Senior Portfolio Manager | June 30, 2014

…rs may be better served staying invested rather than sitting in cash or taking a decisively negative position on bonds. History has shown that volatility can stay low for extended periods. In that case, we would expect credit sensitive assets to continue to generate reasonable returns. While we think investors should retain exposure in the bond market, it is important to be flexible and protect the downside, especially when the price of insurance…

What’s the outlook for muni bonds?

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

…y 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 — The muni yield story remains compelling Yi…

Why pay a premium for municipal bonds?

Columbia Management Municipal Investment Team, | December 18, 2014

The advantages of buying municipal bonds at a premium What are premium, par and discount bonds? Premium bonds carry a coupon rate that is higher than current market interest rates and have a market value above 100 cents on the dollar. Par bonds carry a coupon rate equal to current market interest rates and trade at or near 100 cents on the dollar. Discount bonds carry a coupon rate that is lower than current market interest rates and trade belo…