Pimco bets on capital bonds issued by European banks

Sydney

PACIFIC Investment Management Co likes bonds designed to become part of European banks' capital cushion in times of stress because it sees little risk that they'll end up being needed to shore up balance sheets.

The company, which manages about US$1.5 trillion in assets, is attracted to the additional yield offered by capital instruments issued by European banks, according to Pimco executive vice president Anthony Crescenzi. The lenders' efforts to become safer in the wake of the global financial crisis also reduce the risk that issuers will fail in a manner that might deplete or wipe out such investments, he said.