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Pimco says asset prices can weather Fed shift as ECB to BOJ ease
[SINGAPORE] Pacific Investment Management Co, home to the world's biggest actively run bond fund, says asset prices around the world will be able to withstand a Federal Reserve interest-rate increase.
Central banks in Europe, Japan and China are all poised to add to their monetary easing programs in the fourth quarter, offsetting any Fed move, Pimco's Joachim Fels wrote in a report published this week.
"I find it hard to believe that asset prices would go down if the ECB or the BOJ announced a significant increase of their respective programs," Fels, an economic adviser at Pimco and the former chief economist at Morgan Stanley, wrote in the note.
Fed officials including Chair Janet Yellen have said the central bank will probably raise rates this year, while futures suggest investors are preparing for it to happen in 2016. The Fed outlook, combined with an economic slowdown in China, helped send the MSCI World Index of shares down 10 per cent in the past two months, the steepest decline in four years.
Pimco, with US$1.52 trillion in assets, is based in Newport Beach, California. The US$98 billion Total Return Fund is second in size to the US$120 billion Vanguard Total Bond Market Index Fund, which tracks the performance of a benchmark.