Opportune Time for High-Quality Global Bonds
Text on screen: PIMCO
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Text on screen: Andrew Balls, CIO Global Fixed Income
Balls: With the recent period of rising inflation and rising interest rates likely behind us, markets have started to pay closer attention to the potential rate cuts ahead.
While Central Bank policy rates can stay higher for longer over the next six-to-12 months,
Images on screen: Bank of England, European Central Bank, Gas pump
we believe risks to global growth over the longer-term are skewed to the downside and that returns across asset classes are likely to be more differentiated. Our expectations for low long-term neutral rates and a return to near-target inflation reinforce our positive outlook for core and high-quality fixed income. We think now is the time to make the most of today’s opportunities in global bonds.
Text on screen: TITLE – The yield on high quality bonds remain near their 20-year highs. The Y-axis is labelled Bloomberg Global Aggregate Bond Index– Yield-to-Maturity (USD Hedged). The chart tracks the 2005 to Q12023. In 2005, the yield is at about 3%. From there, it jumped to 6% in 2006, before falling during the Global Financial Crisis and staying below 4%, for 15+ years until shooting to nearly 6% in 2023 and were the 5% range at the end of Q1.
High quality bond funds in developed market bonds now yield close to 5 or 6 per cent, near 20-year highs, meaning that core bonds look compelling: this includes Treasuries and other high-quality government bonds, mortgages and investment grade credit.
By investing actively in global bonds, investors can lock-in yields that are potentially more attractive than cash rates, and may generate higher returns over time.
Additionally, the diversification benefit of core bonds can provide resilience in a multi-asset portfolio.
We continue to target top-tier performance over the long term and across changing market conditions, using a diversified set of strategies to generate additional return and mitigate overly concentrated risk positions.
Text on screen: TITLE – PIMCO’s active approach across global bonds includes:, BULLETS – A top-down macroeconomic view with bottom-up research and analysis, Duration and yield curve positions, Country, sector, and carefully managed currency strategies
With a dedicated platform of over $100 billion in US dollars as of last year, our active approach combines a top-down macroeconomic view with bottom-up research and analysis. Importantly, we look at duration, yield curve positioning, country, sector, and carefully managed currency strategies from across the global bond universe.
As a global team, with deep expertise in core strategies, we really benefit from PIMCO’s strength across the global asset class.
Text on screen: For more insights and information, visit pimco.com
Text on screen: PIMCO
Recorded on 17 March 2024
Disclaimer
Past performance is not a guarantee or a reliable indicator of future results.
Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Outlook and strategies are subject to change without notice.
Bloomberg U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis.
It is not possible to invest directly in an unmanaged index.
This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
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CMR2024-0322-3460942