Perspectives Blog

What’s the outlook for muni bonds?

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

…bond market and consider what the second half of the year may have in store. While we anticipated that municipal bonds would post positive returns in 2014, year-to-date performance is already better than we imagined was achievable for the entire year. Through the end of May, municipal bonds returned 5.91%, among the best performances of all investment classes. Much of the positive performance was a result of an unexpectedly sharp decline in Treas…

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

Why invest in long-term muni bonds? Why investors should focus on tax-free income and total return Many investors fled the muni market in 2013, as $60 billion in mutual fund redemptions attests. Particularly hard hit were longer-maturity funds, likely due to investors anticipating higher interest rates and the negative impact that would have on fixed-income investments, especially longer bonds. While such concerns appear rational, is avoiding…

Compelling opportunity in municipal bonds

Catherine Stienstra, Senior Portfolio Manager | November 7, 2013

…rising tax rates, the advantages of tax-exempt income can be considerable. Attractive yields vs. corporate and Treasury bonds, a historically steep yield curve, defaults at their lowest level since 2009, increasing tax revenues and high income tax rates make municipal bonds a compelling investment opportunity. Third quarter 2013 was a roller coaster for the municipal bond market, as it declined 0.19% — its second consecutive quarterly loss (as…

Asset allocation — Where does fixed income fit it?

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

Surprisingly solid returns for bonds in the first half could lead to disappointment in the second half of the year. We continue to believe high-yield bonds are worth holding, especially higher quality ones. Improved country fundamentals and strong technical support favor EM bonds but caution that returns could be less stable in the near term. So far this year, returns on bonds are positive, with longer duration U.S. bonds performing even bette…

Gut check: The outlook on fixed income

Colin J. Lundgren, CFA, Head of U.S. Fixed Income | February 24, 2014

…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 quality bonds improved? Modestly. 2013 was the second worst calend…

Fixed income strategies – The pros and cons of generating returns with negative duration

Columbia Management, Investment Team | July 14, 2014

…ration in a portfolio, the investment manager will typically employ one or both of the following strategies: buy bonds with short(er) maturities or sell Treasury futures. The former is pretty straightforward, but the latter requires an explanation. Portfolio managers can achieve negative duration shorting Treasury futures, thereby giving the portfolio inverse exposure to Treasuries (when interest rates rise, futures contracts benefit from the dec…

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…