Economics
Pimco Says Market Underestimates Fed Rate Path, Recommends TIPS
- TIPS return 6.6% in first half, versus 5.7% for nominal bonds
- Gauge of inflation expectations falls to record after Brexit
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Pacific Investment Management Co., which manages the world’s biggest active bond fund, says traders are underestimating the potential for the Federal Reserve to raise interest rates following Britain’s decision to leave the European Union.
The bond firm also says it’s a good time to buy Treasury Inflation Protected Securities. It has been recommending TIPS throughout 2016. The securities returned 6.6 percent in the first half, versus 5.7 percent for the broader market, based on Bank of America Corp. data. Financial markets don’t expect a rate increase until the end of 2018, according to a Pimco report Thursday on the company website.