Economic and Market Commentary

Amid Uncertainty, Value Returns to Bonds

Economic uncertainties continue to weigh on markets, but the good news is that bond valuations are now back to attractive levels, with yields offering a powerful source of return potential. Learn more from Group CIO Dan Ivascyn.

READ THE OUTLOOK

More from this section

Read Transcript

Text on screen: PIMCO

Footer Overlay: PIMCO provides services only to qualified institutions, financial intermediaries and institutional investors. This is not an offer to any person in any jurisdiction where unlawful or unauthorized.

Text on screen: Ken Chambers, Product Strategist

Chambers: What are you and the investment committee discussing with this period of heightened volatility?

Text on screen: Daniel J. Ivascyn, Group Chief Investment Officer

Ivascyn: Sure, Ken. I think the most important point is that scenario analysis is critical. Not just focusing on base case views, but really focusing on more extreme scenarios, tails are fat today in terms of the distribution of possible outcomes and we're trying to have a healthy degree of humility for the fact that our base case views may be wrong. But the good news is we can put together portfolios that are resilient under different states of the world. And that really has been the focus. Good news though, after going through a period of such extreme volatility where nearly every financial market asset has gone down this year, valuation has returned to markets, particularly fixed income.

When we look at the fixed income market opportunity set today, it's looking quite attractive both from an absolute perspective or versus cash for investors that may have been on the sidelines looking to avoid the volatility, or even coming from more risky positions within the equity markets where we are cautious on valuations and where we do think there could be a bit more downside within the equity universe specifically. So, with volatility, with a lot of trending markets in the wrong direction from an investor perspective comes opportunity and we're finally at a point where we do see considerable opportunities for the patient fixed income investor.

Chambers: On the back of that, can you talk about the attractive value proposition for bonds today?

Ivascyn: So when thinking about bond valuations, I think you have to think about a world with stickier higher sustained inflation on a go forward basis. So, I guess that's the bad news. Good news is a lot of this is priced into bond markets at the moment.

FULL PAGE GRAPHIC: TITLE – Valuations: Bond value returns. The bar chart shows Yield to Worst (%) for Core Bonds, Agency Mortgage Backed Securities (MBS), Investment Grade Credit, High Yield Credit, Emerging Markets, Munis, and High Yield Munis. As of September 30, 2022, the yields for all the bond sectors shown were significantly higher compared to their yields on December 31, 2021. The top three sectors with the highest yields as of Sept. 30 were High Yield Munis, High Yield Credit, and Emerging Markets.

So, the bottom line is that valuations have changed a lot very, very quickly. Financial condition tightening typically means better value for end investors within the debt markets, and it's finally arrived.

Today as a starting point looking forward is very, very different. When you're earning a 5% type annual yield, 6, 7, 8, 9%, that's a powerful source of return.

We're much more excited this quarter than the last several quarters where it felt like defense should be the focus, I think today careful investors could go on the offense and achieve pretty attractive value.

Text on screen: For more insights and information, visit pimco.com

Text on screen: PIMCO

Disclosure


Past performance is not a guarantee or a reliable indicator of future results.

All investments contain risk and may lose value. Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, call risk, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and low interest rate environments increase this risk. Reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Income from municipal bonds is exempt from U.S. federal income tax and may be subject to state and local taxes and at times the alternative minimum tax. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. Mortgage and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and their value may fluctuate in response to the market’s perception of issuer creditworthiness; while generally supported by some form of government or private guarantee there is no assurance that private guarantors will meet their obligations. High-yield, lower-rated, securities involve greater risk than higher-rated securities; portfolios that invest in them may be subject to greater levels of credit and liquidity risk than portfolios that do not. Equities may decline in value due to both real and perceived general market, economic, and industry conditions. Diversification does not ensure against loss.

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. Investors should consult their investment professional prior to making an investment decision. Outlook and strategies are subject to change without notice.

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.

PIMCO as a general matter provides services to qualified institutions, financial intermediaries and institutional investors. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This is not an offer to any person in any jurisdiction where unlawful or unauthorized. | Pacific Investment Management Company LLC, 650 Newport Center Drive, Newport Beach, CA 92660 is regulated by the United States Securities and Exchange Commission. | PIMCO Europe Ltd (Company No. 2604517) is authorised and regulated by the Financial Conduct Authority (12 Endeavour Square, London E20 1JN) in the UK. The services provided by PIMCO Europe Ltd are not available to retail investors, who should not rely on this communication but contact their financial adviser. | PIMCO Europe GmbH (Company No. 192083, Seidlstr. 24-24a, 80335 Munich, Germany), PIMCO Europe GmbH Italian Branch (Company No. 10005170963), PIMCO Europe GmbH Irish Branch (Company No. 909462), PIMCO Europe GmbH UK Branch (Company No. 2604517) and PIMCO Europe GmbH Spanish Branch (N.I.F. W2765338E) are authorised and regulated by the German Federal Financial Supervisory Authority (BaFin) (Marie- Curie-Str. 24-28, 60439 Frankfurt am Main) in Germany in accordance with Section 15 of the German Securities Institutions Act (WpIG). The Italian Branch, Irish Branch, UK Branch and Spanish Branch are additionally supervised by: (1) Italian Branch: the Commissione Nazionale per le Società e la Borsa (CONSOB) in accordance with Article 27 of the Italian Consolidated Financial Act; (2) Irish Branch: the Central Bank of Ireland in accordance with Regulation 43 of the European Union (Markets in Financial Instruments) Regulations 2017, as amended; (3) UK Branch: the Financial Conduct Authority; and (4) Spanish Branch: the Comisión Nacional del Mercado de Valores (CNMV) in accordance with obligations stipulated in articles 168 and 203 to 224, as well as obligations contained in Tile V, Section I of the Law on the Securities Market (LSM) and in articles 111, 114 and 117 of Royal Decree 217/2008, respectively. The services provided by PIMCO Europe GmbH are available only to professional clients as defined in Section 67 para. 2 German Securities Trading Act (WpHG). They are not available to individual investors, who should not rely on this communication.| PIMCO (Schweiz) GmbH (registered in Switzerland, Company No. CH-020.4.038.582-2). The services provided by PIMCO (Schweiz) GmbH are not available to retail investors, who should not rely on this communication but contact their financial adviser. | PIMCO Asia Pte Ltd (Registration No. 199804652K) is regulated by the Monetary Authority of Singapore as a holder of a capital markets services licence and an exempt financial adviser. The asset management services and investment products are not available to persons where provision of such services and products is unauthorised. | PIMCO Asia Limited is licensed by the Securities and Futures Commission for Types 1, 4 and 9 regulated activities under the Securities and Futures Ordinance. PIMCO Asia Limited is registered as a cross-border discretionary investment manager with the Financial Supervisory Commission of Korea (Registration No. 08-02-307). The asset management services and investment products are not available to persons where provision of such services and products is unauthorised. | PIMCO Investment Management (Shanghai) Limited Unit 3638-39, Phase II Shanghai IFC, 8 Century Avenue, Pilot Free Trade Zone, Shanghai, 200120, China (Unified social credit code: 91310115MA1K41MU72) is registered with Asset Management Association of China as Private Fund Manager (Registration No. P1071502, Type: Other) | PIMCO Australia Pty Ltd ABN 54 084 280 508, AFSL 246862. This publication has been prepared without taking into account the objectives, financial situation or needs of investors. Before making an investment decision, investors should obtain professional advice and consider whether the information contained herein is appropriate having regard to their objectives, financial situation and needs. | PIMCO Japan Ltd, Financial Instruments Business Registration Number is Director of Kanto Local Finance Bureau (Financial Instruments Firm) No. 382. PIMCO Japan Ltd is a member of Japan Investment Advisers Association, The Investment Trusts Association, Japan and Type II Financial Instruments Firms Association. All investments contain risk. There is no guarantee that the principal amount of the investment will be preserved, or that a certain return will be realized; the investment could suffer a loss. All profits and losses incur to the investor. The amounts, maximum amounts and calculation methodologies of each type of fee and expense and their total amounts will vary depending on the investment strategy, the status of investment performance, period of management and outstanding balance of assets and thus such fees and expenses cannot be set forth herein. | PIMCO Taiwan Limited is managed and operated independently. The reference number of business license of the company approved by the competent authority is (110) Jin Guan Tou Gu Xin Zi No. 020. 40F., No.68, Sec. 5, Zhongxiao E. Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.). Tel: +886 2 8729-5500. | PIMCO Canada Corp. (199 Bay Street, Suite 2050, Commerce Court Station, P.O. Box 363, Toronto, ON, M5L 1G2) services and products may only be available in certain provinces or territories of Canada and only through dealers authorized for that purpose. | PIMCO Latin America Av. Brigadeiro Faria Lima 3477, Torre A, 5° andar São Paulo, Brazil 04538-133. | No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of America L.P. in the United States and throughout the world. ©2022, PIMCO.

CMR2022-1014-2477539

Filters: Reset All

Filters

Close Filters Dropdown
  • Tags

    Reset

    Close
  • Category

    Reset

    Bond by Bond
    Careers
    Economic and Market Commentary
    Investment Strategies
    PIMCO Foundation
    PIMCO Education
    View from the Investment Committee
    View From the Trade Floor
    Viewpoints
    Education
    Close
  • Order By

    Reset

    Alphabetical
    Most Recent
    Close
() filters applied

Video Finder

Filter By:
  • Bond by Bond
  • Careers
  • Economic and Market Commentary
  • Investment Strategies
  • PIMCO Foundation
  • PIMCO Education
  • View from the Investment Committee
  • View From the Trade Floor
  • Viewpoints
  • Understanding Investing
  • A
  • B
  • C
  • D
  • F
  • G
  • H
  • I
  • K
  • L
  • M
  • N
  • O
  • P
  • Q
  • R
  • S
  • T
  • W
  • Z
Clear
Tina Adatia
Global and Core Fixed Income Product Strategist
Joshua Anderson
Portfolio Manager, Income and Asset-Backed Securities
Del Anderson
Credit Analyst
Robert Arnott
Founder and Chairman, Research Affiliates
Andrew Balls
CIO Global Fixed Income
Justin Blesy
Asset Allocation Strategist
Meredith Block
ESG Research Analyst
Allison Boxer
Economist
David L. Braun
Head of US Financial Institutions Portfolio Management
Jelle Brons
Portfolio Manager, Global Investment Grade Credit
Nathaniel Brown
Director of the PIMCO Foundation
Erin Browne
Portfolio Manager, Multi-Asset Strategies
Esteban Burbano
Fixed Income Strategist
Grover Burthey
Portfolio Manager, ESG
Libby Cantrill
Public Policy
Kenneth Chambers
Fixed Income Strategist
Stephen Chang
Portfolio Manager, Asia
Devin Chen
Portfolio Manager, Commercial Real Estate
Josh Davis
Global Head of Risk Management
Laura Deneke
Sr. Vice President, Product Strategist
Pramol Dhawan
Head of Emerging Markets Portfolio Management
Joachim Fels
Global Economic Advisor
David Fisher
Co-Head of Strategic Accounts, U.S. Global Wealth Management
Gene Frieda
Global Strategist
Nick Granger
Portfolio Manager, Quantitative Analytics
Adam Gubner
Portfolio Manager, Distressed Debt
Gregory Hall
Head of U.S. Global Wealth Management
Mary Hoppe
Ray Huang
Portfolio Manager, Real Estate
Daniel H. Hyman
Head of Agency MBS Portfolio Management
Daniel J. Ivascyn
Group Chief Investment Officer
Mark R. Kiesel
CIO Global Credit
Erica Kinsella
Product Strategist, ESG Strategies
Kaboo Leung
Christine Long
Head of Retirement Marketing
Nicola Mai
Portfolio Manager, Sovereign Credit Analyst
Raji O. Manasseh
Equity Strategist
Samuel Mary
ESG Research Analyst
Scott A. Mather
CIO U.S. Core Strategies
Kyle McCarthy
Alternative Credit Strategist
Mohit Mittal
Portfolio Manager, Multi-Sector
Alfred T. Murata
Portfolio Manager, Mortgage Credit
John Murray
Portfolio Manager, Commercial Real Estate
John Nersesian
Head of Advisor Education
Roger Nieves
Jason Odom
Strategist, Asset Allocation
Rick Pagnani
Head of Insurance-Linked Securities
Sonali Pier
Portfolio Manager, Multi-Sector Credit
William Quinones
Product Strategist
Lupin Rahman
Head of EM Sovereign Credit
Libby Rodney
Steve A. Rodosky
Portfolio Manager, Real Return and Long Duration
Emmanuel Roman
Chief Executive Officer
Steve Sapra
Client Solutions & Analytics
Jerome M. Schneider
Head of Short-Term Portfolio Management
Marc P. Seidner
CIO Non-traditional Strategies
Emmanuel S. Sharef
Portfolio Manager, Asset Allocation and Multi Real Asset
Greg E. Sharenow
Portfolio Manager, Commodities and Real Assets
Anmol Sinha
Candice Stack
Head of Client Management, Americas
Kimberley Stafford
Global Head of Product Strategy
Cathy Stahl
Global Head of Marketing
Christian Stracke
Global Head of Credit Research
Geraldine Sundstrom
Portfolio Manager, Asset Allocation, EMEA
Richard Thaler
Distinguished Service Professor of Economics and Behavioral Science at the University of Chicago's Booth School of Business
Mark Thomas
Account Manager, Global Wealth Management
Jessica K. Tom
Senior Credit Analyst
Eve Tournier
Head of European Credit Portfolio Management
Francois Trausch
CEO and CIO, Allianz Real Estate
Jerry Tsai
Quantitative Research Analyst
Megan Walters
Global Head of Research, Allianz Real Estate
Qi Wang
CIO Portfolio Implementation
Jamie Weinstein
Portfolio Manager, Head of Corporate Special Situations
Tiffany Wilding
North American Economist
Andrew T. Wittkop
Portfolio Manager, Treasuries, Agencies, Rates
Kirill Zavodov
Portfolio Manager
Ben S. Bernanke
Chair, Global Advisory Board
PIMCO
  • Alphabetical
  • Most Recent
Section : Date : Experts :
Reset All
Take Advantage of Today’s Attractive Bond Yields
View from the Investment Committee

Call to Action: Take Advantage of Today’s Attractive Bond Yields(video)

Call to Action: Take Advantage of Today’s Attractive Bond Yields

Following a challenging year, value has returned to the bond market, presenting investors with attractive opportunities to generate alpha heading into 2023. Learn more from our Group CIO Dan Ivascyn.

Emerging Markets: Changing Landscape, Increasing Opportunities
Higher Yields Offer Credit Investors Attractive Return Potential
Staying Selective in Emerging Markets Debt Investing
Assessing Risks, Uncovering Global Opportunities
Inflation, Recession and the Road Ahead

Load more results Load {{cCtrl.fetchResults}} more results