Asset manager Pimco eyes opportunities in Asian local-currency bond markets amid US downturn

Fed policy tightening and the recent banking-sector crisis are weighing on US economy, Pimco CIO Daniel Ivascyn says

Asset manager views China’s growth prospects as ‘fairly strong over the near term’

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Ivascyn, Pimco’s chief investment officer, says China and the rest of Asia are likely to continue to grow at rates faster than most other areas of the world. Photo: Xiaomei Chen

Published: 7:30am, 22 May 2023

Pimco, one of the world’s biggest asset managers overseeing assets worth US$2 trillion, sees opportunities in Asia’s local-currency bond markets amid an economic downturn in the United States, although geopolitical uncertainties and concerns about moderating growth in China are risks that cloud this outlook.

The Federal Reserve’s policy tightening and the recent banking-sector crisis are weighing on the US economy, which is staring at a possible recession in 2024, Daniel Ivascyn, Pimco’s chief investment officer (CIO), said in an interview with the South China Morning Post. The US regional banks crisis is not over yet, with the protracted debate over the debt ceiling adding another layer of complexity to the situation, he added.

“We’re not expecting the type of economic shock that we witnessed during the global financial crisis or during Covid-19, but a more moderate and extended, multi-quarter recession,” Ivascyn said. “But you certainly need to prepare investment portfolios for something worse, for a harder landing scenario.”

China remains one of the last few markets globally without an inflation problem, which means there is room for monetary easing to fend off an economic slowdown, Ivascyn said. Bond prices, which move inversely to yields, rise when interest rates are lowered, as the declining yield on new issues makes previously issued bonds more appealing.

“China has a decent amount of growth momentum,” he said. “We think China’s growth prospects look fairly strong over the near term.”