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…

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

Oil and the high yield market

Columbia Management, Investment Team | December 8, 2014

By Jennifer Ponce de Leon, Senior Portfolio Manager and Head of High Yield and Mark Van Holland, CFA, Senior Portfolio Manager  Size of the Energy Sector Because the energy sector is a large component of the U.S. high yield market relative to some other asset classes, the market has received increased scrutiny due to recent declines in oil prices. Prior to the recent sell off, energy accounted for more than 15% of the high yield market, making i…

U.S. rates — When the facts change

Zach Pandl, Portfolio Manager and Strategist | September 10, 2014

Prospective returns for Treasuries now look poor across the curve—not just at the front end. Yield curves tend to flatten as central banks raise short-term rates, but valuations have now moved beyond the point where these trades make sense. Investors should brace for higher interest rates, not just a flattening yield curve. When the facts change At the start of this year our views on U.S. interest rates were underpinned by two main facts: (1)…

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…

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…

Q2 fixed income outlook – Hitting for the cycle

Gene Tannuzzo, CFA, Senior Portfolio Manager | March 31, 2014

…interest rate increases are quite possible by mid next year. From current levels, we think intermediate-maturity yields (3-7 year) should rise, and investors should reduce interest rate risk, or duration, in that part of the curve. We expect a flatter yield curve over the next few months as investors focus less on tapering, and more on the timing and pace of rate increases. However, we don’t think investors should avoid duration altogether. While…