(Bloomberg) — Daniel Evaskin, chief investment officer at Pacific Investment Management, is preparing for a “harder landing” than other investors, as central bank chiefs prepare to continue raising interest rates, he said in an interview with the Financial Times.
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“The more tightening people feel incentivized to do, the greater the uncertainty about these delays and the greater the risk of more extreme economic forecasts,” Evaskine told the paper.
When rates have risen in the past, he added, a five- or six-quarter lag for the effect to be felt was “the norm.” He also argued that the market may still be very confident in the quality of the central bank’s decisions and its ability to engineer positive outcomes, according to the Financial Times.
Although Pimco believes a “soft landing” is the most likely outcome for the US economy, Evaskine told the newspaper, the world’s largest active bond fund manager is avoiding areas of the market that would be most vulnerable in a recession.
The company, which is owned by Germany’s Allianz SE, prefers high-quality government and corporate bonds at the moment. It is awaiting a downgrade of the company’s credit rating, which Evaskin said will lead to a forced sale between vehicles such as collateralized loan obligations in the months and years ahead. Now is the time to snap deals, he told the Financial Times.
Evasen warned that this course may be different from previous courses. Central banks may be less willing to provide support for fear of fueling higher prices, he told the newspaper, while the fact that much of the risk has been transferred to private markets should slow, but not prevent, the deterioration of credit ratings. added.
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