Too Early to Declare Victory Over Inflation or Recession, PIMCO Says

• US Bond Manager, Pacific Investment Management Company LLC (PIMCO), emphasizes that it is premature to declare victory over inflation despite market expectations of a soft landing for the U.S. economy. The bond manager suggests that recession risks persist, warranting a vigilant approach.
• PIMCO predicts that bonds will outperform stocks in 2024, especially in the event of a recession. Despite a recent bond-market rally driven by expectations of Fed rate cuts, the company adopts a neutral stance on duration, highlighting that it currently doesn’t view duration extension as a compelling tactical trade.
• Looking ahead, PIMCO expresses concerns about long-term bonds facing potential challenges due to worries about widening U.S. fiscal deficits and increased government bond issuance. The company anticipates that anxiety regarding elevated supply, seen in late summer, could lead to further weakness in the long-end curve. PIMCO favours government bond maturities of five to 10 years and is "underweight" in the 30-year area.

(Source: Reuters)