Skip to content

Pimco Warns Bonds Facing Headwinds From Inflation, Central Banks

  • Manager favoring stocks over bonds at this stage of cycle
  • More value priced into bonds, but markets still under pressure
Video player cover image
WATCH: Erin Browne, portfolio manager at Pacific Investment Management Co., discusses rising global inflation and central banks’ policies.Source: Bloomberg

Bond markets will continue to face pressure from inflation and tighter monetary policy from the world’s central banks, making stocks a better bet during this stage of the economic cycle, Pacific Investment Management Co. said in its May asset-allocation outlook.

Bond yields have surged this year as traders price in an aggressive path of Federal Reserve interest-rate hikes until mid-2023, with the central bank widely expected to raise its key benchmark rate by a half-percentage point on Wednesday and indicate that further such moves are on the way. The Fed is also set to outline at this week’s meeting when it will start to reduce its bond holdings, a step that will likely pull tens of billions of dollars from the market each month as it allows securities to mature.