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Pimco Issues Inflation Warning at a Time When Costs Are Falling
by Wes Goodman
June 10, 2015 — 9:39 PM EDT
Pacific Investment Management Co. says U.S. inflation is poised to quicken -- at a time when costs are falling at the fastest pace in five years.
Pimco, which runs the world’s biggest actively managed bond fund, said it likes Treasury Inflation Protected Securities. Federal Reserve efforts to spur the economy will push prices high enough to surprise investors, according to the company.
“We see value in U.S. inflation-linked bonds,” Scott Mather, the chief investment officer for U.S. core strategies, wrote on the company’s website Wednesday. “The extraordinary policy response of the past few years could result in more inflation than expected.”
Investors will get to bet on Pimco’s view in U.S. auctions during the next week, starting with a 30-year bond sale Thursday. The securities are among the most sensitive to inflation because of their long maturity, and they’d be most appealing to investors who see costs holding in check. Fund managers who agree with Mather can buy 10-year Treasury Inflation Protected Securities on June 16 and 30-year TIPS on June 18.
Benchmark 10-year U.S. yields fell 1 basis points to 2.47 percent as of 7:22 a.m. in London, according to Bloomberg Bond Trader data. The price of the 2.125 percent note due May 2025 rose 3/32, or 94 cents per $1,000 face amount, to 96 31/32.
more:
http://www.bloomberg.com/news/articles/2015-06-11/pimco-warns-inflation-to-pick-up-after-cutting-government-stake
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