Perspectives Blog

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…

The Yellen Fed

Zach Pandl, Portfolio Manager and Strategist | October 9, 2013

President Obama to nominate Janet Yellen for Fed Chair. Yellen has strongly supported the Fed’s unconventional easing measures in recent years, and we expect that her nomination will therefore be interpreted as favorable to duration and carry trades. Yellen has described an “optimal control” framework, which could indicate a coming revision to the current structure of the FOMC’s forward guidance. According to press reports, Preside…

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

…15bn market and can offer spreads of 50–60 bps for an average life of 5–7 years. High-quality industrial corporates, which lack the government guarantee, are currently offering similar spreads for securities with a comparable duration. With credit spreads approaching pre-crisis tight levels, the risk-reward for credit risk has become less compelling. The Columbia Management Core Team has taken advantage of this relationship by swapping from 5-yea…

Thoughts on navigating market volatility in today’s technology markets

Rahul Narang, Senior Portfolio Manager | April 28, 2014

…many stocks down 40% over the past six weeks. Similarly, the Internet sector is down approximately 15% from the highs on March 7, 2014 with many stocks down more than 25%. The market seems to have less appetite for the longer duration TAM (total available market) and revenue multiple stories, with greater preference for current earnings power. We wanted to share some historical perspective on the hyper growth software (SaaS or Cloud) names as wel…

Slack and inflation

Zach Pandl, Portfolio Manager and Strategist | July 21, 2014

…capacity means one of two outcomes is likely: (1) earlier-than-expected rate hikes or (2) higher-than-expected inflation. The distinction matters for the shape of the yield curve, but both outcomes are unfriendly for Treasury duration. Separately, limited spare capacity means that inflation risks have become more balanced. We are not concerned about the size of the Fed’s balance sheet and its ability to tighten policy when the time comes. Rather,…

Does it still pay to hold municipal bonds?

Anders Myhran, Municipal Portfolio Manager | July 29, 2014

Price is important but income should be a factor when considering an investment. Don’t get caught on the sideline, the opportunity cost could be detrimental. 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 sen…