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Economic and Market Commentary

Get Ahead: Term Out Your Assets

As central banks eye cutting rates, investors seeking higher returns may consider extending maturities beyond traditional cash investments to lock in today’s high bond yields – and potentially benefit from price appreciation, too.

Text on screen: PIMCO

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Text on screen: Ken Chambers, Fixed Income Strategist

Kenneth Chambers: What are the advantages of terming out an investment compared to sitting in cash when we're having this shift in the landscape?

Text on screen: Marc P. Seidner, CIO Non-traditional Strategies

Marc Seidner: Well, look, a lot of investors ask us the same question. Cash gives us five and a quarter, five and three-eighths percent, it's the highest points on the yield curve. Why would I put money anywhere else right now? And the answer is that the normalization, the easing cycle is coming.

And if you can lock in, as you say, term out those assets, it's probably wise to do it now before it's not there any longer.

Text on screen: Term out assets and lock in rates

Images on screen: PIMCO trade floor

The analogy and the comparison that I like to make is that as we think back to 2021 and early 2022  the smart entities termed out their liabilities two or three years ago. Smart folks today might be considering terming out their assets, maybe not right now, but certainly over the course of the coming months.

And then finally, as we expand out and think about the asset allocation set, it's a unique moment right now where bonds out yield equities and we think there's a unique opportunity to use fixed income to get similar type yields and better sort of better structured, better contained potential outcomes.

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

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

Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, 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.

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.

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