PIMCO 2008 Outlook

Powerhouse bond manager PIMCO recently posted their outlook for 2008.  In a nutshell they intend to take the following positions:

Interest Rates – Expect rates to continue to decline.  They have targeted above-index duration, primarily on the front end of yield curve in both the U.S. and U.K.

Mortgages – Their plan is to overweight this sector as valuations now look attractive after being beaten down in 2007.  Focus is on the high-quality sector, not sub-prime.

Credit – PIMCO's focus is on higher credit quality issues, especially in banking and finance where there appears to be the most value after a very poor 2007.

Currency – Their strategy is to focus on Asian and emerging markets' currencies, as continued weakness in the U.S. Dollar is expected.

Emerging Market Bonds – They plan to focus on higher credit quality EM debt.  Countries of emphasis are Mexico, Russia and Brazil.

TIPS – With lower yields and higher inflation, real returns are expected to be low.  TIPS do not offer much value.

Municipals – Yields are at historically high levels versus comparable Treasuries.  An overweight is expected.

To see PIMCO's full outlook, please click on this PIMCO Link.