Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Joining us now after that, incredible pricing expert on short
Speaker 2: term and really expert on what PIMCO is thinking. Anthony
Speaker 2: Crescenzi joins, this just definitive to Paul, just thrilled to
Speaker 2: have you here. What is the weekend like at PIMCO?
Speaker 2: What are you in a sum statement saying in Newport
Speaker 2: Beach in New York about this moment.
Speaker 1: Lots of email traffic, lots of back and forth, lots
Speaker 1: of two way opinions. I tried to weigh in with
Speaker 1: the optimistic opinion. PIMPCO delivered a cyclical outlook, a one
Speaker 1: year outlook a few weeks ago called Uncertainty is Certain.
Speaker 1: I tried to rename it. I wanted to say that
Speaker 1: there's more certainties in some areas. There's a lot of
Speaker 1: uncertainty regarding trade, that's for sure, But isn't there for
Speaker 1: a business more certainty about the trajectory on regulations and
Speaker 1: also for taxation. Those are things that matter. So if
Speaker 1: you look at the Small Business survey for the last
Speaker 1: month called then you see they're uncertainty index plunged because
Speaker 1: they're confident about some things that matter. To them, So
Speaker 1: we have to take a broader perspective. One quick note
Speaker 1: Tom and Paul on this, like on regulations. For example,
Speaker 1: when Donald Trump took office in twenty sixteen, the Federal Register,
Speaker 1: a book of all rules and regulations of the US government,
Speaker 1: was ninety six thousand pages. The first year plunged to
Speaker 1: sixty thousand. The estimate for last for twenty twenty four
Speaker 1: is that it rose back over one hundred thousand pages.
Speaker 1: You could imagine that'll be trimmed massively. It means there
Speaker 1: could be disinflationary forces along with the inflationary forces that
Speaker 1: we're hearing a lot about, especially over the weekend. Ye
Speaker 1: regarding tariffs, So thing holistically think about the entirety of
Speaker 1: the policy and policies of the administration.
Speaker 2: I mean, Briant, Paul, I'm fascinated to see what President
Speaker 2: Trump's polling is. You know how we doing thing in
Speaker 2: the coming weeks.
Speaker 3: So Tony, that sounds like a scenario perhaps in your
Speaker 3: world to fixed income maybe it take some credit risk here.
Speaker 3: How do you guys think about that versus me just
Speaker 3: clipping my four and a quarter to your treasury coupon?
Speaker 1: This is the bond market is a target rich environment.
Speaker 1: There's much to do between. There are yields between five
Speaker 1: and seven percent for high quality fixed income. By high
Speaker 1: quality we mean what the rating agencies say, are a
Speaker 1: rated triple BE rated and above. A triple B rated
Speaker 1: bond will have, for example, it's considered investment grade a
Speaker 1: point one to three percent default history per year, so
Speaker 1: you get ninety nine point nine percent chance of getting
Speaker 1: your money back. So many many different securities around the world,
Speaker 1: you can get yields between five and seven and the
Speaker 1: starting yield court on the US Bloomberg Aggregate exp explains
Speaker 1: on for ninety four percent correlation the return over a
Speaker 1: five year period. So whatever that number is seven percent today,
Speaker 1: that's that's going to be your return the next five years.
Speaker 1: So one final word on credit, it doesn't have to
Speaker 1: be corporate bonds. There's so much to do. As I said,
Speaker 1: it's weeks ago Mexico Saudi Arabia issued bonds in US dollars.
Speaker 1: Mexico triple BE rated to US and rating agencies had
Speaker 1: a yield of two fifty two fifty over treasury two
Speaker 1: net points more than US treasuries. And so if you
Speaker 1: think and installo denominies, you don't have worry about the currency.
Speaker 1: If you think that the government of Mexico will pay
Speaker 1: you back, that's not a bad choice to make over
Speaker 1: Triple B corporates, which are one hundred basis points more
Speaker 1: than treasury, so lots to do. Target rich bonds are
Speaker 1: very attractive relative to history, expected inflation and expected volatility.
Speaker 1: Very excited about the run up and yield as well.
Speaker 1: This is a second bite at the apple what we've
Speaker 1: seen in recent weeks. I was afraid that yields have
Speaker 1: fallen fallen too fast.
Speaker 3: So I mean, as Tom likes to talk about it,
Speaker 3: I mean, this is in your world now. You can
Speaker 3: just play for the yield. You don't have to be
Speaker 3: like really smart on price appreciation.
Speaker 1: But the real exciting thing, uh, Tom Paul is looking
Speaker 1: at forward short term interest rates. The bond market is
Speaker 1: priced for the Fed to lowerge pols rate to four
Speaker 1: percent and then leave it. They are the rest of
Speaker 1: the decade. If you believe that the defensive properties of
Speaker 1: bonds have returned, meaning that bonds will rise when stock
Speaker 1: prices fall, then you're getting the defensive properties of fixed
Speaker 1: income for free the rest of the decade. In the
Speaker 1: sense that if something bad. Anything bad happens that drives
Speaker 1: yields lower, they'll you'll you'll get you'll get a great
Speaker 1: benefit of total return. So it's really total return time
Speaker 1: in the fixed income RKERT think about the yield plus
Speaker 1: the potential for a drop in in UH yield from
Speaker 1: here and then rising price. It could go the other way.
Speaker 1: We could talk about that, but we don't think so.
Speaker 2: The summation is and I don't have it in front
Speaker 2: of me, but basically the last ten years on a
Speaker 2: total return in bonds had been bloody. Mean PIMCO was
Speaker 2: built the great moderation, you know, adding alpha to that.
Speaker 2: I mean Bill Gross is off in Mexico buying Mexican
Speaker 2: stuff to do a carry trade. But the bottom I
Speaker 2: don't know Muhammad was doing.
Speaker 1: By the way, last week in the Financial Times.
Speaker 2: Did you see this? What'd you think of that?
Speaker 1: I love it, And what I love most is and
Speaker 1: I said this on the stage in Miami last week.
Speaker 1: I said, you know, there's something more about to asset
Speaker 1: management than looking at the returns and gathering assets and such.
Speaker 1: It affects people's millions of lives. I was in a
Speaker 1: place that's a Catholic place and I remind me of
Speaker 1: going to Boystown in Nebraskas, and I saw a picture
Speaker 1: of Father Flanagan, famous from a movie from nineteen thirty
Speaker 1: eight with Spencer Tracy, and reminded me of the importance
Speaker 1: of the work we do, because the work we do
Speaker 1: affects the work that other people do, whether it's a
Speaker 1: pension manager or building a company or a hospital.
Speaker 2: So we went three years ago, Mohammed and Bill were
Speaker 2: on good behavior, speaking terms. The best thing in this
Speaker 2: article on the ft on William Gross was a photograph
Speaker 2: What a mess, And I'm looking there his Monroe Traders there,
Speaker 2: explain to our audience to how cool it is that
Speaker 2: Bill Gross had six Bloombergs and a Monroe Trader on des.
Speaker 1: And like a Tonight's Show host or any of the
Speaker 1: late show hosts, it seemed as his area was elevated
Speaker 1: above others to give that sense of power. I was
Speaker 1: looking in that photo to see if I was in it,
Speaker 1: because I know I was sitting behind him in that
Speaker 1: photo somewhere, and it's a little blurry, so I'm not
Speaker 1: sure it was me.
Speaker 2: So where's the real?
Speaker 3: Quickly, Tony real, quickly. The best opportunity here that you
Speaker 3: see that you guys are talking about these.
Speaker 1: Days simply do not need to reach. Well, if we
Speaker 1: went by asse sectors in the bond market, the most
Speaker 1: liquid expression of credit would be agency mortgage backed securities
Speaker 1: using one forty over treasures. But as I said, it's
Speaker 1: it's a time you can FEMBOSEI the heck out of
Speaker 1: the bond market.
Speaker 2: Now.
Speaker 1: I mean you take the big fifteen hundred page book,
Speaker 1: find lots of things to do. It's a really great
Speaker 1: time to be a fixed income active manager.
Speaker 2: Yeah.
Speaker 3: I mean for a while nobody wanted to talk to
Speaker 3: a copt up parties because you.
Speaker 1: You had no care. Lots of uncertainames. Just stay invested.
Speaker 1: All the history is on the equity market to the
Speaker 1: bond market. Stay invested. You missed the few best days
Speaker 1: and you missed a giant portion of the return over time.
Speaker 2: Don't be a strange I'll talk to Stettna the next time.
Speaker 2: Tony Cass you think for having so much with the
Speaker 2: Pacific Investment Management Company, there