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…

Rates rise, convertibles do what?

David King, CFA, Senior Portfolio Manager | August 9, 2013

…ods, convertible securities had a negative return only when equities also lost money. Convertible returns were neutral or positive as long as stock returns were positive.* While it is difficult to measure, the option-adjusted duration of the convertible market is low, similar to that of a short-duration bond fund.** Re-allocating bond exposure to convertibles will tend to shift risk away from interest rates and toward equity risk factors like gro…

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…

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…

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…

Gut check: The outlook on fixed income

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

…l over the next three years. Same question for municipal bonds? Maybe not first, but should win a medal. Municipal bonds suffered with most other high-quality fixed-income sectors in 2013. The asset class tends to have longer durations so rising rates can be challenging. Munis also suffered from negative headlines (such as Detroit, Puerto Rico) and persistent outflows. But the underperformance of the sector appeared excessive to us. Any fixed inc…