Perspectives Blog

Finding the sweet spot — Value investing along the muni yield curve

Paul Fuchs, CFA, Portfolio Manager, Municipal Bonds | August 27, 2014

…slope of the current yield curve with our expectations for curve reshaping going forward. Investing, in part, based on the slope of the yield curve is commonly referred to as “roll-down,” which signifies the aging process of bonds. As bonds age, or become shorter in maturity, they are evaluated at lower interest rates, provided the overall yield environment has not changed and the yield curve is upward sloping. Historically, the municipal yield…

Special report – 2014 mid-year review and outlook

Columbia Management, Investment Team | June 16, 2014

…nomic backdrop, interest rates in most developed markets look unsustainably low. We therefore expect meaningful increases in the second half of 2014 as bond markets begin to reflect the increasingly mature recovery. Municipal bonds James Dearborn, Head of municipal bonds investments Review: Municipal bonds had a strong first half of 2014. While the drop in Treasury rates since the end of 2013 is the primary reason for the strong performance, ther…

Asset allocation: The conundrum of 2014

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | March 3, 2014

When economic growth levels off, the headwinds for bonds subside, which fits the patterns of 2014 so far. With bond yields at current levels, the attractiveness of interest rate risk from a valuation standpoint is meager. Should the economic data reaccelerate, we would expect equities to perform well and rate sensitive bonds to struggle. In 2013, both the S&P 500 Index and the yield on 10-year Treasury bonds finished the year at their high…

Fixed income strategies – The pros and cons of generating returns with negative duration

Columbia Management, Investment Team | July 14, 2014

…ctly does it mean to have negative duration? Negative duration: How to get there and what it costs To decrease duration in a portfolio, the investment manager will typically employ one or both of the following strategies: buy bonds with short(er) maturities or sell Treasury futures. The former is pretty straightforward, but the latter requires an explanation. Portfolio managers can achieve negative duration shorting Treasury futures, thereby givi…

January asset allocation update

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | February 3, 2014

As we assess the global markets in early 2014, our overall portfolio strategy remains modestly overweight equities and underweight fixed income. While we have been anticipating an increase in volatility, we still believe equities will outperform bonds over the course of the year. The current low level of interest rates suggests returns from bonds remain unattractive on a longer term strategic basis. Real returns are likely to be low to potential…

Puerto Rico’s double-downgrade

Michael Taylor, Senior Municipal Analyst | February 10, 2014

…O rating by two notches to ‘Ba2’; ratings that are capped by or linked to the Commonwealth’s GO rating were also downgraded two notches, with the exception of the Puerto Rico Aqueduct and Sewer Authority (PRASA) Revenue Bonds. The moves were by no means a surprise. Puerto Rico’s economic contraction and fiscal decline has been persistent, well-documented and widely acknowledged within the municipal marketplace. Over the past decade the gove…

Duration for diversification

Columbia Management, Investment Team | November 19, 2013

…still be a cornerstone of any disciplined portfolio. By Zach Pandl, Senior Portfolio Manager, and Gene Tannuzzo, Senior Portfolio Manager We often hear investors say something like the following: “I own stocks for growth and bonds for income.” But in practice, of course, that is not how it really works. Investors hold portfolios for total return but invest across asset classes for diversification. Diversification is still one of the most fascina…