Perspectives Blog

When do floating rate loans begin to float?

Columbia Management, Investment Team | July 11, 2013

…an uptick in coupon payments. However, relative performance for bank loans has been strong, and this asset class provides important diversification benefits to fixed income portfolios. By Yvonne Stevens, Co-Head of Leveraged Debt Group, Ron Launsbach, CFA, Portfolio Manager, and Katy Brentz, CFA, Product Manager Given the significant and rapid move in Treasury yields over the last month, many investors in the floating rate asset class may be exp…

The role of income inequality

March 3, 2014

…e global financial crisis. Most studies now point to the lack of income growth for the bottom 95% of the income distribution in combination with an unsustainable rise in borrowing as a causal factor that escalated the crisis. Debt levels relative to income escalated during the same period, but more perilously for the bottom 95% (see Exhibit 2). Debt is merely borrowed spending from the future, and becomes particularly onerous if incomes do not ri…

Puerto Rico’s turbulent ride

Michael Taylor, Senior Municipal Analyst | September 26, 2013

…Puerto Rico’s persistently struggling economy and detailing widespread mutual fund exposure to Puerto Rico bonds, spreads widened considerably, with yields on longer-dated triple-tax-exempt Puerto Rico General Obligation (GO) debt trading in excess of 10% (from 7%) at times. Exacerbated by industry-wide mutual fund outflows, and perhaps some forced-selling, 2013 has proven to be the worst year for Puerto Rico bonds in over a decade. According to…

The truth about April’s budget surplus

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | May 16, 2013

…ts). Also, social insurance taxes rose 8% (about a third of total receipts) largely due to the expiration of the Social Security payroll tax cut. The jump in total receipts has bought the Treasury some time to stay within the debt ceiling limit, which is also a relief. What is good for the Treasury and the budget presents some burden on households, as taxpayer refunds are down 3.5% this year versus last, with the average refund down 2%. This may…

M&A in healthcare – Out with the old, in with the new?

Harlan Sonderling, CFA, Senior Healthcare Analyst | March 31, 2014

…ccrued more to the selling shareholders than to the acquirer’s. More often than not, Company A’s stock price would decline on the day of the announcement, and Company B’s would rise as Company A diverted from dividend growth, debt reduction and using its cash to invest in organic growth. Investors assumed, until proven otherwise, that acquisitions were value destructive, at best a means of manufacturing earnings to manage through a period of poor…

Outlook for the leveraged loan market

Columbia Management, Investment Team | June 20, 2013

…e in the context of credit risk and corporate fundamentals are stronger. A robust credit review process is a key component of successful investing in this asset class. By Lynn Hopton and Yvonne Stevens, Co-Heads of Leveraged Debt Group, with Katy Brentz, Product Manager The leveraged loan market has been on fire in the first five months of 2013, with strong investor appetite bringing down several well-established records. A massive injection of…

Gut check: The outlook on fixed income

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

…or performance can be explained as payback (reversal of strong inflows when the sector was in favor), concerns about tapering, China slowing and deteriorating growth prospects more broadly in EM countries. Countries in the EM debt market that suffered the most last year were those that ran large current account deficits and faced potential funding challenges when the Fed tapered (i.e., the so-called “Fragile Five” countries of India, Indonesia, T…