Perspectives Blog

Don’t throw the baby out with the bath water – The case for long muni bond funds

Catherine Stienstra, Senior Portfolio Manager | January 29, 2014

…, state and/or federal income taxes. As tax rates move higher, investments that provide income exempt from taxes, such as municipal bonds, become more appealing. There was a significant increase in rates and steepening of the yield curve in 2013, as the yield on the 30-year AAA muni bond increased by 134 basis points, ending the year at 4.19%. While we expect rates to gradually move higher over the next year, we believe that most of the movement…

The taxman cometh

James Dearborn, Head of Municipal Bonds | March 13, 2014

New and higher taxes will increase what many owe Muni bonds can help mitigate your tax bill Muni yields are attractive vs. many other investment options With tax season fully upon us, many Americans are about to realize the harsh realities of the new tax environment that came into effect January 2013 with the passage of the oddly named American Taxpayer Relief Act of 2012 and the introduction of taxes associated with the Affordable Care Act (A…

Q2 fixed income outlook – Hitting for the cycle

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

We have started to reduce exposure to high-quality bonds with limited upside potential and high-yield bonds in which credit risk appears too aggressive. Following weakness last year, emerging market debt has posted gains this year, and we expect further strength ahead as volatility subsides. While we expect a flatter yield curve over the next few months as investors focus on the timing and pace of rate increases, we don’t think they should avoi…

From tactical to core – The case for emerging market debt

Columbia Management, Investment Team | June 2, 2014

For many investors, emerging market debt could be viewed as a core-portfolio holding rather than a short-term tactical investment. 2013’s re-pricing created value in terms of higher yields, a more dedicated investor base and a better relative value argument. Flexibility across the full spectrum of EMD investment opportunities is extremely important, as emerging markets are not homogenous. By Patrick McConnell, Director, Fixed Income Product Ma…

Q3 fixed income outlook – The demise of volatility

Gene Tannuzzo, CFA, Senior Portfolio Manager | June 30, 2014

Because yield is an important driver of returns, we believe investors may be better served staying invested rather than sitting in cash or taking a decisively negative position on bonds. History has shown that volatility can stay low for extended periods. In that case, we would expect credit sensitive assets to continue to generate reasonable returns. While we think investors should retain exposure in the bond market, it is important to be flex…

Has dividend investing lost its luster?

Columbia Management, Investment Team | May 12, 2014

…pated accelerating corporate earnings. For the year, S&P 500 operating earnings rose by 10.8% with P/E multiple expansion accounting for the rest of the market’s rise. One result of this move is that the market’s dividend yield declined from over 2.5% to just under 2% currently. At the same time, U.S. Treasury rates (as measured by 10-yr bonds) rose by 1.25% to end the year at 3% reversing what had been a relatively unique phenomenon—yields o…

Asset allocation — Where does fixed income fit it?

Columbia Management Global Asset Allocation Team, | August 25, 2014

…for U.S. Treasuries so far this year. The lower rates elsewhere make sense in the context of weaker economic performance, but the prospective returns for government bonds across the globe are now paltry. Exhibit 1: U.S. bond yields relative to G7 bond yields of similar maturity As of June 30, 2014 We remain overweight in high-yield bonds but valuation analysis suggests that returns are likely to be modest going forward, driven primarily by coup…