Perspectives Blog

Finding the sweet spot — Value investing along the muni yield curve

Paul Fuchs, CFA, Portfolio Manager, Municipal Bonds | August 27, 2014

We look for securities that offer a balance of credit fundamentals and yield. We use a “roll-down” analysis to identify the sweet spot on the yield curve. We believe yield curve positioning is the largest driver of returns for intermediate municipal portfolios. The cornerstone of the Columbia Management municipal investment process is identifying relative value opportunities. As we construct and manage portfolios, a relative value component is…

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…

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

Columbia Management, Investment Team | July 14, 2014

…profile. Keep in mind that selling Treasury futures is not free and can actually cost the portfolio in terms of yield and total return if the yield curve shifts down. What a portfolio manager is doing is selling Treasury futures on a specific maturity (e.g., selling the 5- or 10-year Treasury) and essentially betting that the yield on that specific maturity moves higher. The portfolio is no longer collecting that yield or rolling down the yield

What’s the outlook for muni bonds?

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

…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 municipal bond market and consider what…

Gut check: The outlook on fixed income

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

The next big move in rates may be triggered by concerns about possible future Fed rate hikes. High-quality bonds may struggle to generate coupon-like returns. Emerging markets may ultimately benefit from the synchronized uptick in growth in global developed markets. With nearly two months of the year behind us, we thought now would be a good time to see how the fixed-income market is faring in 2014 and assess our outlook. We asked our investme…

A primer on preferred securities

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

…? • Investors primarily view preferred securities as a way to buy a high quality company and receive an enhanced yield relative to the senior unsecured debt. Currently, the yield on traditional preferred securities is 200 to 250 basis points above the yield of senior unsecured paper. • U.S. corporations can deduct 70% of income received on certain preferred securities (DRD Preferred securities). • Individuals pay a maximum statutory rate of 20% o…

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

…such as municipal bonds, become more appealing. There was a significant increase in rates and steepening of the yield curve in 2013, as the yield on the 30-year AAA muni bond increased by 134 basis points, ending the year at 4.19%. While we expect rates to gradually move higher over the next year, we believe that most of the movement — and damage to long bonds — has already occurred. The resulting higher and steeper curve (see Exhibit 1) has lef…