Pacific Investment Management Co. says the U.S. economy is poised to “run fast” along with emerging-market countries, to the benefit of banks, secured loans and bonds, and junk-rated debt that may be upgraded to investment-quality.
“The experience of running fast, or at least running faster, is something the U.S. economy is finally set to do,” Mark Kiesel, global head of corporate bond portfolios at Pimco, wrote on the firm’s website. The fund favors credits in emerging markets, the U.S. and countries “tied into strong emerging markets growth,” such as Canada and Australia, he wrote.
The biggest bond-fund manager boosted its forecast for U.S. economic growth by 1 percentage point to as much as 3.5 percent after President Barack Obama agreed to extend tax cuts enacted by his predecessor and as Federal Reserve Chairman Ben S. Bernanke seeks to reduce unemployment and avert deflation by buying Treasuries. Pimco is based in Newport Beach, California.
“The U.S. economy has turned the corner from a cyclical perspective due to the combination of accommodative monetary policy and increased near-term fiscal stimulus along with gradually improving trends in underlying economic fundamentals,” wrote Kiesel, who was nominated for fixed-income manager of the year by Morningstar Inc.
“Europe appears sick and is set to ‘run slow’ on a relative basis, with subpar economic growth,” he wrote.
Junk, or high-yield, bonds and leveraged loans are rated below Baa3 by Moody’s Investors Service and lower than BBB-minus by Standard & Poor’s.
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