Perspectives Blog

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…

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…

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…

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…

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

Columbia Management, Investment Team | December 1, 2014

…kinds of risks the fund is taking. Is the fund earning its yield by investing in riskier below-investment grade bonds, through riskier sectors or longer maturity bonds? Remember, there is no free lunch. Higher yield generally means higher risk. In this low and uncertain interest rate environment, how can conservative investors stay invested, avoid excess interest rate or credit risk and still generate a competitive return? A high-quality short-t…

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,…