economy
Pimco is warning about a spike in defaults
Pimco is warning fixed-income investors to stay away from lower-quality credit, but sees plenty of opportunities in high-quality assets.
TL;DR
- Pimco predicts a credit loss cycle, with higher losses expected in lower-quality credit like leveraged and private direct lending.
- Quality and credit selection will become increasingly important due to geopolitical, domestic political, and industrial policy drivers.
- Tight credit spreads indicate market complacency, and investors can no longer rely on outdated assumptions.
- High-quality fixed income can offer competitive income levels with lower volatility and potential resilience in various scenarios.
- Pimco identifies high-conviction opportunities in intermediate-term bonds, agency mortgage-backed securities, global government bonds, inflation-linked bonds, and real assets like gold.