HALISTER1: Pimco’s Kiesel Says Corporate Credit Valuations Are ‘Compelling’

Pimco’s Kiesel Says Corporate Credit Valuations Are ‘Compelling’

(Bloomberg) -- Pacific Investment Management Co.’s head of corporate bond portfolio management Mark Kiesel spoke in interview in Sydney on Friday.
  • Says corporate bond valuations are “compelling” and spreads are too wide
  • Market is underpricing Federal Reserve rate increases and inflation risks
  • Has overweight position on investment-grade debt and has been adding to it
  • In IG space he favors:
    • Bonds from U.S. and some European banks, mostly with a preference for more senior ranking securities
    • Securities related to U.S. housing sector such as non- agency mortgages and debt from homebuilders and building materials companies
    • Health care, medical devices and pharmaceuticals
  • Has “started to play selective offense” in investment- grade energy bonds
  • Sees oil under pressure for next few months, then rising to $45 or $50 a barrel by year end; currently around $27
  • Says U.S. economy is healthy and can generate 2% growth
  • Sees core inflation accelerating to 2% by end of 2016; says TIPS are one of most attractive assets
  • Sees U.S. rate rise putting downward pressure on corporate bond supply
  • Low rates elsewhere in the world likely to encourage demand for corporate bonds, according to Kiesel
  • He says concerns about banks overblown, noting strength of capital levels and profitability
  • High-yield bond market pricing in 8% default risk, while he sees it at 5%
  • Kiesel says Pimco investing in HY debt “defensively”
  • “Cautious” on emerging markets and sees developed markets offering better risk-reward
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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21429Z US (Pacific Investment Management Co LLC)

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Mark Kiesel (Pacific Investment Management Co LLC)

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