Bond giant Pimco made a case for owning high-quality U.S. bonds yielding about 5%-8% rather than stocks on Wednesday, in part because they should offer downside protection if the U.S. economy falters over the next six to 12 months.
The report, written by Nicola Mai, sovereign credit analyst, Tiffany Wilding, economist, and Andrew Balls, chief investment officer of global fixed-income, warned that an economic “soft landing” would be an “anomaly,” given that almost all instances when central banks hiked rates by more than 400 basis points since the 1960s resulted in recession.
The tough talk sparked a jolt higher in longer-term Treasury yields, with the 30-year BX:TMUBMUSD30Y rate briefly touching 5% and the 10-year yield BX:TMUBMUSD10Y setting fresh highs in 2023. The Pimco team said cash can also be attractive, given that short-term yields BX:TMUBMUSD03M are high relative to history, offer flexibility and liquidity, but they also that “cash yields are fleeting.”
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