Pimco’s Kiesel Says Time to Buy More Bonds as U.S. in Good Shape

Pimco's Kiesel: We See Value in Credit Right Now

The U.S. economy is “doing fine,” which means it’s a good time to add credit to your portfolio, according to Mark Kiesel, chief investment officer for global credit at Pacific Investment Management Co.

Bonds of consumer-oriented companies offer “significant value” now that spenders in the U.S. are in their best shape in a decade, Kiesel said in a television interview on Bloomberg <GO> on Monday. He said Pimco sees “significant value” in sectors including gaming, telecommunications, cable and health care.

“Now is a good time to increase credit,” Kiesel said. “We think it’s an income world in a 1 percent to 3 percent real growth environment. That should favor select credit investments, specifically housing-related sectors and consumer sectors.”

Despite a three-month rally in junk bonds Pimco remains “more selective” and is reducing exposure to debt of risky energy companies. In high-yield, the investment company favors bonds of building materials, gaming and health care companies.

The extra yield investors demand to hold high-yield debt has fallen to 6.34 percentage points above comparable Treasuries, down from 8.97 percentage points on Feb. 11, according to data compiled by Bloomberg.

Kiesel said stabilization in China, rebounding oil prices and tightness in the U.S. labor market should push inflation to 2 percent by the end of the year. He recommended investors buy Treasury Inflation Protected Securities, or TIPS, to hedge against inflation rising over time. Pimco also expects one to two interest rate hikes from the U.S. Federal Reserve this year. Futures traders are forecasting a 55 percent chance of one hike by year-end.

Before it's here, it's on the Bloomberg Terminal.