Perspectives Blog

Q2 fixed income outlook – Hitting for the cycle

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

…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 short-term rates will eventually rise, the yield curve is exceptionally steep, an…

What should U.S. bond investors expect in 2014?

Zach Pandl, Portfolio Manager and Strategist | January 6, 2014

The timing of the Fed’s QE exit is no longer the central question An accelerating economy could mean another challenging year for duration risk A major question is whether markets begin to doubt the Fed’s commitment to low rates If bond investors were asked to summarize 2013 in a single word, we suspect that many would pick “taper.” The question of when the Federal Reserve (the Fed) would begin dialing back quantitative easing (QE) dominated m…

The case for active muni management

Kimberly Campbell, Senior Portfolio Manager | April 21, 2014

Muni bonds represent an attractive investment opportunity Active management is a value add in these volatile markets Professional money managers can help investors navigate an ever-changing environment Where does one invest in a world of uncertainty? Rising taxes, volatile markets, low yields, economic stagnation, geopolitical unrest. We live in a world of great uncertainty — yet our investment goals remain the same: a comfortable retirement,…

Dovish feathers showing through

Zach Pandl, Portfolio Manager and Strategist | April 14, 2014

Dovish comments by Fed officials lead us to believe that normalization in interest rates could take a more circuitous route. While the steady economic recovery makes higher yields inevitable, the path we take to get there is dependent on the Yellen Fed’s policy approach. We remain underweight duration, but are now less sure 3-5yr yields will lead the way over the near-term. Textbooks would have us believe that monetary policy is a hard science…

Detroit and Stockton are game changers for municipalities in fiscal distress

Columbia Management Municipal Investment Team, | December 22, 2014

Contrary to past experience and conventional wisdom, general obligation bonds are not sacrosanct and very low recovery rates are possible. Pensioners and other politically favored classes are likely to be treated more kindly than bondholders. Chapter 9 bankruptcy appears to be ineffective at addressing underfunded pension liabilities and will likely remain a rarely used option. By Ty Schoback and Michael Taylor, Senior Analysts, Tax-Exempt Fix…

Rising rates and REIT returns

Arthur Hurley, CFA, Senior Portfolio Manager | September 15, 2014

While REITs typically demonstrate some interest rate sensitivity and sometimes have a “knee-jerk” reaction down when rates first move up, performance has often rebounded. An improving economy has the potential to dampen the effects of duration risk and interest rate sensitivity, given the increased earnings and dividend growth REITs can produce. The balance of income and organic growth attributable to REITs can offer an attractive investment op…

Credit alternatives in government-backed debt

Columbia Management, Investment Team | June 23, 2014

One way investors may boost yields without taking on undue credit risk is through U.S. government agency debt. While many investors associate U.S. agency debt with very low yields, other types of agency debt can offer significant spreads to Treasuries with a modest decline in liquidity. We have been increasing our allocation to the agency market in core portfolios as a way to reduce credit risk while maintaining competitive yields. By Carl W….