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Business Times
11-07-2025
- Business
- Business Times
Pimco sees Japan wooing capital as tariffs spur diversification
[SINGAPORE] Japan has emerged as a prime destination for global investors as the trade war triggers a reassessment of capital flows into the US, according to Pacific Investment Management Co (Pimco). The Asian nation is drawing inflows that seek to benefit from 'once-in-a-generation structural reforms' in equities and rising rates in fixed income after decades of monetary stimulus, according to Ben Ferguson, co-head of Pimco in Japan. US President Donald Trump's policy announcements have been 'disruptive' and the latest tariff announcements 'highlight the need to, at least consider diversification', he added. 'Japan historically has not been a focus as an investment opportunity for global investors, but this is one of the most dynamic moments that we have seen in this economy for the better part of the last three decades,' Ferguson, a former Goldman Sachs banker who joined Pimco in 2023, said. 'Japan has moved towards the top of mind for global allocators.' A worldwide backlash against Trump's trade war is accelerating the hunt for alternatives to US assets, and Japan, with its multi-trillion dollar bond and equity markets, has become a favoured bet. Global funds have continued to scoop up Japanese assets after buying a record 9.2 trillion yen (S$81 billion) of stocks and bonds in April, according to government data. There are, of course, risks to the outlook. The US has slapped a 25 per cent tariff on Japan's shipments that will come into effect on Aug 1, with the nation also subject to a levy on cars and auto parts as well as a tariff on steel and aluminium. As the deadline approaches, both Tokyo and Washington are facing growing pressure to strike a deal. 'There's a rationale there, which is Japan geopolitically is one of the most – if not the most – important relationship to the United States,' said Ferguson, citing the US' significant military presence in the country. 'Both sides have an incentive to make sure that this specific trade issue does reach a resolution.' BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Investment opportunities Pimco, which oversees more than US$2 trillion, expects investors to plough more money into the world's third-biggest bond market as it's an 'attractive investment diversification from a large Treasury allocation, especially when swapped into the US dollar', according to Ferguson. A degree of calm has returned to Japan's bond market after authorities trimmed sales of longer-dated debt to allay jitters sparked by the reduction of the central bank's purchases. A sale of 20-year government bonds proceeded smoothly on Thursday (Jul 10), with the bid-to-cover ratio for the offering rising to the highest level since March. 'What we saw over the last few months may be the high end of the range of volatility in the market,' Ferguson said. 'We think the relative value, particularly at the long end, is attractive.' At the asset management industry level, Ferguson is keen to tap into opportunities to help invest the more than US$7 trillion of domestic savings accumulated by Japanese households, which is among the biggest pool of such capital in the world. If this stockpile of cash is not recycled back into the economy, it may hamper corporations' ability to make fresh investments, weigh on productivity and hurt Japan's ambitions for sustainable price growth. 'If you think about national resources on a global scale, Saudi Arabia has oil, Japan has savings,' Ferguson said. 'You can be savings-rich, but if everyone else is outgrowing you and those savings are not deployed to drive economic activity and growth, you actually end up becoming poorer. It's a headwind for the economy.' BLOOMBERG
Mint
04-06-2025
- Business
- Mint
Pimco Sees Value in Japanese Bonds Despite Chaotic Yield Moves
Investors can pick up bargains in Japanese government bonds despite a wave of recent selling that has spread volatility throughout global debt markets, according to Pacific Investment Management Co. The bond fund manager, which oversees over $2 trillion in assets, has released a report on the recent volatility in Japan's bond market. One surprising conclusion: The possibility of more quantitative tightening by the Bank of Japan could be a good thing for JGBs, since it will relieve pressure on the long-end of the curve, where the central bank is less active. Pimco's vote of confidence in the market will give reassurance to other investors, given the firm's clout in global fixed-income. Japan's once sleepy debt market has taken a starring role in recent turmoil, turning the country's government bond auctions into closely-watched barometers of stress — with the potential to spread volatility from Australia to the US. 'While higher volatility is likely to continue, we believe that JGB valuations could be attractive for foreign investors seeking yield and diversification in global fixed income,' wrote co-head of Asia-Pacific portfolio management Tomoya Masanao, portfolio manager Ryota Kawai and economist Allison Boxer in a note. Japan's 10-year yields were around 1.50% on Wednesday, slightly higher on the day. Part of Pimco's argument is that Japanese policymakers have the tools to deal with supply and demand imbalances in the market, which have been exacerbated by dwindling long-term bond buying by life insurance companies and the BOJ's huge investments in shorter-term notes. The Ministry of Finance could more actively manage its issuance at shorter intervals, perhaps on a quarterly basis, the Pimco team wrote. That would give it more flexibility than the current system of fixing an annual issuance plan in advance. They also said that a continued reduction of bond investment by the BOJ, through quantitative tightening, could relieve pressure on longer-term yields. This is because the central bank tends to concentrate its purchases on the short-end of the market, meaning longer-term bonds take the brunt of volatility. 'The BOJ's share of shorter-dated JGBs has made the long end an escape valve for any rise in the term premium,' they wrote. 'If the BOJ continues to reduce its JGB holdings, typical market mechanisms could return to the rest of the yield curve.' The BOJ has been gradually reducing its massive balance sheet and scaling back on bond purchases, fueling questions about which investors can fill up the missing demand. On May 20, a sale for 20-year notes fizzled out with demand at its weakest in more than a decade. The auction of 40-year bonds on May 28 was met with the weakest demand in 10 months. But although swings in yields and disappointing auctions have rattled nerves, Pimco's team wrote that much of the volatility in Japan's $7.8 trillion bond market appears to be driven by technical factors. They pointed to the eye-catching returns investors can now get on Japanese debt as a reason to look past these factors and load up on bonds. 'For foreign investors accustomed to the pre-pandemic era of low or negative yields on JGBs, the current environment is striking: 30-year JGBs hedged to the US dollar now yield over 7%,' they wrote. 'Interest rate risk in Japan may indeed be a component of an attractive allocation to duration globally – a significant change from the pre-pandemic decade.' This article was generated from an automated news agency feed without modifications to text.
Yahoo
18-04-2025
- Business
- Yahoo
Pimco Warns US Markets Mirroring UK and EM After Tariff Shock
(Bloomberg) -- US financial assets are at risk of 'mirroring dynamics of the UK and emerging markets' as the Trump administration embraces protectionism, says Pacific Investment Management Co. Trump Signs Executive Orders on Federal Purchasing, Office Space DOGE Places Entire Staff of Federal Homelessness Agency on Leave How Did This Suburb Figure Out Mass Transit? Why the Best Bike Lanes Always Get Blamed Nashville's $3 Billion Transit Plan Brings a Call for Zoning Reform 'Rapid US policy changes pose challenges for investors accustomed to a global financial system anchored in U.S. markets and assets.,' write Marc Seidner and Pramol Dhawan in a paper published Thursday. In the wake of the White House announcing a barrage of tariffs, the Treasury yield curve has steepened, led by long-dated yields rising sharply, while the US dollar and Wall Street share prices have also weakened. That combination suggests investors are demanding a higher risk premium to own dollar-denominated assets. 'With its protectionist policy pivots, the US is giving investors worldwide an occasion to rethink long-held assumptions,' regarding the country's investment outlook, and they said 'the recent parallel slides of the US dollar, equities, and Treasuries marks 'a combination more often associated with emerging market (EM) economies.' The $2tn bond manager characterizes US tariffs as 'A self-inflicted supply-side shock, similar to Brexit,' and one they see leading 'to a stagflationary outlook,' that means the Federal Reserve having 'to chart an interest rate path that balances resurgent inflation expectations with dimming US growth projections.' One silver lining is that adverse markets could spur a shift in policy, and the recent decision to delay the implementation of many tariffs and seek trade negotiations has helped calm US markets this week. 'Thus far, this is a self-inflicted wound for the US,' and Pimco said 'Sentiment and market performance could quickly reverse if we see a shift toward less disruptive – and more predictable – US trade policies.' Pimco also warn that US markets may not see the scale of official support that ensured during prior bouts of intense volatility and big losses for asset prices. 'Investors have come to expect forceful government intervention during economic and market downturns,' and Pimco said 'fiscal support appears less likely – not by choice, but due to limited capacity for additional debt. This era of strained geopolitical relations could mean far less global policy coordination than during previous crises.' Based on this outlook, Pimco list key investment strategies: Underweight the US dollar, as the country 'has the largest negative net international investment position (NIIP), financed by global capital. As this rebalances, the dollar may weaken.' Overweight global duration, or interest rate exposure in Europe, EM, Japan and the UK as these regions appear attractive. Favor trades that benefit from yield curve steepening, as the US shift to 'emphasizing nationalism introduces a greater fiscal risk premium.' Underweight credit, as Pimco expects 'a more significant divergence between investment grade (IG) and high yield (HY) credit, as IG balance sheets remain more flexible and insurance companies continue to support IG credit, a trend unlikely to extend to HY.' Trade Tensions With China Clear Path for Salt-Powered Batteries GM's Mary Barra Has to Make a $35 Billion EV Bet Work in Trump's America How Mar-a-Lago Memberships Explain Trump's Tariff Obsession Trump Is Firing the Wrong People, on Purpose The Monastery Where Founders Meditate on Code and Profit ©2025 Bloomberg L.P. Sign in to access your portfolio
Yahoo
06-04-2025
- Business
- Yahoo
Legendary fund manager sends blunt 9-word message on stock market tumble
The stock market fell significantly after President Trump announced widespread tariffs on April 2. The so-called 'Liberation Day' announcement included tariff rates higher than hoped, forcing investors to reset expectations for the U.S. economy and corporate earnings. Given recent data, a potential slowdown in the U.S. economy may already be underway, and the risk that tariffs could push us into an outright recession casts a long shadow over stocks, given that stock prices' valuation is largely determined by future expectations for revenue and profit steep sell-offs like we're witnessing in the S&P 500 and Nasdaq Composite, which were down 17% and 22% early on April 4, respectively, from their January highs, create opportunities for risk-tolerant investors to 'buy the dip.' The potential that investors go bargain hunting has caught the attention of veteran Wall Street bond manager Bill Gross. Gross has been navigating markets since 1971, and he co-founded Pacific Investment Management Co, or PIMCO, a massive firm with $2 trillion under management. He formerly managed over $270 billion via PIMCO's Total Return Fund, earning him the 'Bond King' nickname before moving to Janus Henderson Investors from 2014 to 2019. Gross has seen a lot over his 50-year career, and he offered a blunt message about the stock market this week. The Federal Reserve has a dual mandate to target low inflation and unemployment, two often contrary goals that can leave the Fed behind the curve when it comes to shifting monetary policy. For example, raising interest rates slows economic activity, crimping inflation. However, it also leads to layoffs, which we're currently incorrectly predicting in 2021 that inflation would be transitory, Fed Chairman Jerome Powell eventually enacted the most restrictive and hawkish interest rate hikes since then-Fed Chairman Paul Volcker fought back inflation in the early 1980s. However, delaying the inflation fight contributed to 8% inflation in 2022. While inflation has since retreated, it is cumulative, so the damage associated with hesitancy is still being felt. A weakening job market partly caused by higher rates keeping a lid on economic activity prompted the Fed to cut rates in the fourth quarter. However, inflation has crept higher to 2.8% in February from 2.4% in September, leading the Fed to press pause further cuts. Unfortunately, pausing hasn't helped revive job growth. According to the Bureau of Labor Statistics, the unemployment rate in February totaled 4.2%, up from 3.5% as recently as 2023. And 275,000 Americans lost their jobs in March, according to Challenger, Gray, & Christmas, partly because of Department of Government Efficiency (DOGE) job cuts. The number of layoffs grew an eye-popping 205% year over year. It was the biggest month for layoffs since Covid cratered the economy in 2020. What happens next to the economy is uncertain, but increasing unemployment and rekindled inflation isn't a great recipe. Moreover, President Trump's tariff tussle risks fueling inflation's fire, and given consumers are already cash-strapped, it may take a big toll on corporate profit and earnings growth. Bill Gross's long-time Wall Street experience means that he's seen many market pops and drops, including the Nifty 50, skyrocketing inflation in the 1970s, the S&L crisis in the late 80s and early 90s, the Internet boom and bust, the Great Recession, Covid, and the 2002 bear market. In short, Gross has been around the block, making his take on markets this week particularly worrisome."Investors should not try to 'catch a falling knife," wrote Gross bluntly in an email to Bloomberg. Buying the dip in the S&P 500 has been a winning strategy historically, but the pain endured while stocks find their bottom can be hard to withstand. And it can take years to recover losses. The situation is worse for individual stocks, which may never get back to their previous highs (case in point: Cisco Systems () still trades below its 1999 peak). "This is an epic economic and market event similar to 1971 and the end of the gold standard except with immediate negative consequences,' said Gross. In the early 70s, a collection of 50 leading stocks became regarded as "one decision" stocks - buy only. Money was concentrated within them, setting up a significant market drop when they peaked in 1972. Sound familiar? It's a bit unclear what will happen next. Fed Chair Powell admitted that he thinks the tariff impact will be worse than previously forecast, perhaps setting up rate cuts again. Meanwhile, President Trump is on the airwaves pressing for Powell to cut rates—a strategy that hasn't worked in the past. Perhaps the recent market drop will encourage negotiations that lower tariffs, easing their impact. But that remains to be seen, and Gross isn't convinced. 'Trump can't back down anytime soon,' said Gross. 'He's too macho for that.'Sign in to access your portfolio
Miami Herald
05-04-2025
- Business
- Miami Herald
Legendary fund manager sends blunt 9-word message on stock market tumble
The stock market fell significantly after President Trump announced widespread tariffs on April 2. The so-called "Liberation Day" announcement included tariff rates higher than hoped, forcing investors to reset expectations for the U.S. economy and corporate earnings. Given recent data, a potential slowdown in the U.S. economy may already be underway, and the risk that tariffs could push us into an outright recession casts a long shadow over stocks, given that stock prices' valuation is largely determined by future expectations for revenue and profit growth. Related: Billionaire Michael Bloomberg sends hard-nosed message on economy Historically, steep sell-offs like we're witnessing in the S&P 500 and Nasdaq Composite, which were down 17% and 22% early on April 4, respectively, from their January highs, create opportunities for risk-tolerant investors to 'buy the dip.' The potential that investors go bargain hunting has caught the attention of veteran Wall Street bond manager Bill Gross. Gross has been navigating markets since 1971, and he co-founded Pacific Investment Management Co, or PIMCO, a massive firm with $2 trillion under management. He formerly managed over $270 billion via PIMCO's Total Return Fund, earning him the "Bond King" nickname. Gross has seen a lot over his 50-year career, and he offered a blunt message about the stock market this week. Bloomberg/Getty Images The Federal Reserve has a dual mandate to target low inflation and unemployment, two often contrary goals that can leave the Fed behind the curve when it comes to shifting monetary policy. For example, raising interest rates slows economic activity, crimping inflation. However, it also leads to layoffs, which we're currently experiencing. Related: Jim Cramer offers blunt one-word reaction to 20% tariffs After incorrectly predicting in 2021 that inflation would be transitory, Fed Chairman Jerome Powell eventually enacted the most restrictive and hawkish interest rate hikes since Fed Chair Paul Volcker fought back inflation in the early 1980s. However, delaying the inflation fight contributed to 8% inflation in 2022. While inflation has since retreated, it is cumulative, so the damage associated with hesitancy is still being felt. A weakening job market partly caused by higher rates keeping a lid on economic activity prompted the Fed to cut rates in the fourth quarter. However, inflation has crept higher to 2.8% in February from 2.4% in September, leading the Fed to press pause further cuts. Unfortunately, pausing hasn't helped revive job growth. According to the Bureau of Labor Statistics, the unemployment rate in February totaled 4.2%, up from 3.5% as recently as 2023. And 275,000 Americans lost their jobs in March, according to Challenger, Gray, & Christmas, partly because of Department of Government Efficiency (DOGE) job cuts. The number of layoffs grew an eye-popping 205% year over year. It was the biggest month for layoffs since Covid cratered the economy in 2020. What happens next to the economy is uncertain, but increasing unemployment and rekindled inflation isn't a great recipe. Moreover, President Trump's tariff tussle risks fueling inflation's fire, and given consumers are already cash-strapped, it may take a big toll on corporate profit and earnings growth. Bill Gross's long-time Wall Street experience means that he's seen many market pops and drops, including the Nifty 50, skyrocketing inflation in the 1970s, the S&L crisis in the late 80s and early 90s, the Internet boom and bust, the Great Recession, Covid, and the 2002 bear market. In short, Gross has been around the block, making his take on markets this week particularly worrisome. Related: Fed official revamps outlook on U.S. economy amid tariff turmoil "Investors should not try to 'catch a falling knife," wrote Gross bluntly in an email to Bloomberg. Buying the dip in the S&P 500 has been a winning strategy historically, but the pain endured while stocks find their bottom can be hard to withstand. And it can take years to recover losses. The situation is worse for individual stocks, which may never get back to their previous highs (case in point: Cisco Systems still trades below its 1999 peak). "This is an epic economic and market event similar to 1971 and the end of the gold standard except with immediate negative consequences," said Gross. In the early 70s, a collection of 50 leading stocks became regarded as "one decision" stocks - buy only. Money was concentrated within them, setting up a significant market drop when they peaked in 1972. Sound familiar? It's a bit unclear what will happen next. Fed Chair Powell admitted that he thinks the tariff impact will be worse than previously forecast, perhaps setting up rate cuts again. Meanwhile, President Trump is on the airwaves pressing for Powell to cut rates-a strategy that hasn't worked in the past. Perhaps the recent market drop will encourage negotiations that lower tariffs, easing their impact. But that remains to be seen, and Gross isn't convinced. "Trump can't back down anytime soon," said Gross. "He's too macho for that." Related: Veteran fund manager unveils eye-popping S&P 500 forecast The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
