Pimco Cools on Covered Debt After Record Rally: Credit Markets
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Europe’s covered bond market is falling out of favor with Pacific Investment Management Co. after a record rally sent relative yields to a three-year low.
“Investors are looking for other asset classes where they can achieve a better return on their risk,” said Timo Boehm, a money manager focusing on European covered debt at Pimco, which manages about $2 trillion of assets including the world’s biggest bond fund. Some highly rated alternatives including sovereign-backed and agency notes are “much cheaper,” he said, speaking by telephone from Munich last week.