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Economic and Market Commentary

Seizing Opportunities in Global Bonds

In a challenging macro environment, a resilient allocation to core bonds appears compelling. Andrew Balls, CIO Global Fixed Income, shares insights on the return potential for investors given yields are now very attractive.

Financial markets faced sharp corrections over 2022, as soaring inflation forced central banks to increase interest rates to tackle the possibility of an inflationary spiral.

But while 2002 was painful, in an uncertain macro environment, the outlook for fixed income has become much more positive in recent months from an asset allocation perspective given that yields are now very attractive.

Developed market bonds now yield more than 5 per cent, meaning that core bonds – such as Treasuries, mortgages and investment grade credit – have become more attractive to include within a broader multi-asset portfolio.

Importantly return potential can be further enhanced by investing actively, providing an attractive entry point. Additionally, following the recent rise in interest rates, the diversification benefit of core bonds in a multi-asset portfolio is now better.

We seek to provide our investors with top-tier performance over the long term through changing market conditions. Importantly, myself and the global PM team look to use a diversified set of strategies to generate additional return, so as not to be overly concentrated in any one risk.

Active strategies include duration and yield curve, country, sector, and carefully managed currency strategies from across the global bond universe. We have built a dedicated platform of over $100 billion in assets as of last year, which combines our top-down macroeconomic view with bottom-up research and analysis.

As a global bond team, we really benefit from PIMCO’s expertise across the global asset class.

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