Perspectives Blog

The perils and pitfalls of buying individual municipal bonds

James Dearborn, Head of Municipal Bonds | February 27, 2014

Volatile ratings leave retail investors at risk Retail investors could pay higher prices Deck is stacked against retail investors With an increasing focus on the benefits of owning municipal bonds — attractive after-tax yields, low historical default rates and relatively low volatility — investors are again considering purchasing individual muni bonds. But the deck may be stacked against the retail investor. The allure of owning individual bon…

Are municipal bond rating agencies shifting the goalposts (again)?

Columbia Management Municipal Investment Team, | September 30, 2013

…logies. Are the rating agencies shifting the goalposts (again)? There are many types of municipal bonds offering a wide disparity of credit quality and commensurate yield levels to compensate for the various degrees of credit risk. Responsible investment practice requires an appropriate assessment of credit risk and ensuring adequate yield compensation for the level of credit risk taken with any investment purchase. For example, it would not be p…

Duration for diversification

Columbia Management, Investment Team | November 19, 2013

Many investors struggle to determine the appropriate amount of bond duration in an environment of rising interest rates. The right amount of duration has to be considered in a portfolio context, because the main value of duration exposure comes through diversification. Because of the negative correlation between duration and the returns of riskier assets, high-quality fixed income will still be a cornerstone of any disciplined portfolio. By Za…

Monetary policy shift creates new investment challenges

Columbia Management, Investment Team | August 6, 2013

…ss. Second, you must reconsider the dynamics of portfolio diversification in an era where policy tightening might be expected to generate simultaneous losses across many asset classes. Our favored areas for taking investment risk Recent volatility might have soured investors’ taste for investment risk-taking, but we believe that numerous opportunities for positive expected returns remain for the balance of 2013. In fact, the repricing of many as…

Municipals flashing “buy” signal

Chad Farrington, CFA, Head of Municipal Bond Research | July 8, 2013

The recent swift correction in tax-exempt interest rates has created opportunities for municipal bond investors to attain very attractive risk-adjusted returns. An investor in the highest tax bracket could achieve around a 7.0% taxable equivalent yield in today’s market environment. With credit quality largely remaining stable for many municipal issuers and rates significantly higher than just a few weeks ago, this may be a good time to lock in…

Learning to stand on your own

Colin Moore, AIIMR, Global Chief Investment Officer | June 27, 2013

Markets must now learn to cope with less support from Fed. I believe investors will adjust to the higher confidence regarding sustainable growth and the risk premium will fall more than the slow rise in rates. Equity markets will likely recover, but expect some stumbles along the way. Awww! The equity market is learning to stand on its own without the Federal Reserve holding its hand. There will be moments when it ends up on its bottom but the…

Obamacare’s insurance exchanges

Columbia Management, Investment Team | December 9, 2013

…own exchanges; there are 17 state exchanges. Not surprisingly, initial enrollment on all public exchanges has skewed heavily toward Medicaid and the less healthy. Underrepresented are young, healthy individuals needed to fill risk pools forecast by government actuaries. A number of states are rolling beneficiaries of their existing free or heavily subsidized insurance programs into Medicaid. Questions remain as to whether Obamacare (ACA) will rea…