Perspectives Blog

Trouble in paradise: Q&A about Puerto Rico bonds

Chad Farrington, CFA, Head of Municipal Bond Credit Research and Senior Portfolio Manager | January 2, 2014

…impact all municipal market issuers. Summing up Investors seeking income have long been attracted to Puerto Rico bonds because of their yield potential and tax-exempt status. Most PR bonds are currently rated as investment grade, but are trading below investment-grade levels. If PR bonds are downgraded further, there will be negative financial consequences, and Puerto Rico could have considerable difficulty accessing the muni market; both of thes…

Should your income be fixed?

David King, CFA, Senior Portfolio Manager | December 16, 2013

…rvative. So is an investment with regular, defined cash returns. No wonder high-quality government and corporate bonds are a huge asset class. It feels uncomfortable to challenge the merits of popular and conservative investment vehicles, but today there is basis for doing so. The historical role of bonds, bank term deposits, savings accounts, etc. has been to provide an adequate rate of return with low risk. If these investments will do that tod…

Does it still pay to hold municipal bonds?

Anders Myhran, Municipal Portfolio Manager | July 29, 2014

…etrimental. You must consider the short and long term when investing. Many investors say they don’t want to own bonds because interest rates are going up. They would have a point if yields were to shoot up tomorrow or next week. Since most bonds and bond funds include some degree of interest rate sensitivity (duration), it is all but unavoidable that if yields rise, prices will fall. While investors are understandably concerned about what can ha…

Sizing up the fixed income market

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

…trategies can help mitigate these risks by focusing on the most attractive parts of the market such as corporate bonds, recognizing liquidity constraints posed by Wall Street and mega managers, and using market disruptions that do not have lasting effects as investment opportunities. First, the case for exercising caution around interest rates is strong, but investors shouldn’t paint all bonds with the same brush. Fed policy makers appear set to…

The case for active muni management

Kimberly Campbell, Senior Portfolio Manager | April 21, 2014

…includes the new 3.8% Net Investment Income Tax) in addition to possible state and local income taxes. Municipal bonds are one of the few investments that remain exempt from many of these taxes, including the NIIT. Active is the answer After determining that muni bonds should play a part in a diversified portfolio, the next question is: Which investment approach should one take — active or passive? With so many investment options to choose from,…

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

…. Based on the past four tightening cycles, the average fed funds rate increased by 300 basis points. Given that bonds on the short end of the market are constantly maturing, short funds have natural and frequent reinvestment opportunities to increase yields without being forced to sell bonds in a potentially stressed market to generate cash to reinvest at higher rates. Source: Columbia Management Advisers, LLC 2. Investing in shorter maturity s…

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

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

…sed on the slope of the yield curve is commonly referred to as “roll-down,” which signifies the aging process of bonds. As bonds age, or become shorter in maturity, they are evaluated at lower interest rates, provided the overall yield environment has not changed and the yield curve is upward sloping. Historically, the municipal yield curve has been upward sloping the vast majority of time. Evaluating a bond at a lower yield will result in a high…