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Published August 29, 2009  |
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Asia's bank bonds looking attractive, says Pimco
'The worst is over,' Tokyo-based Mr Ozeki said in a telephone interview yesterday. 'Asian countries managed to maintain stability in the banking system. Banks are still facing headwinds but the risk of systemic crisis seems to be behind us.' The difference between yields on financial company bonds in Asia and benchmark government securities widened to desirable levels because of the financial crisis, Mr Ozeki wrote in an article on Pimco's website. In the US and Europe, the potential for credit spreads to narrow 'is limited', according to the report. The extra yield investors demand to hold Asian financial company bonds rather than government securities stands at 512 basis points, down from 1,065 points on Dec 12, according to JPMorgan Chase & Co's Asia Financial Bond Index. The spread is averaging 356 basis points in the US and 271 basis points in Europe this year, Merrill Lynch data show. A basis point is 0.01 percentage point.
'During the first half of this year Pimco has invested actively in bonds and securities of issuers whose credit qualities remained high and stable in our opinion, even as the sovereign risk premium widened,' Mr Ozeki said in his report. Still, investors should 'make rigorous and prudent bond selection' since, although Asia's financial bond spreads have narrowed since April, there is a chance that the market may reverse, Mr Ozeki said in the report. The financial crisis, which started with the collapse of the US property market in 2007, has triggered US$1.61 trillion of writedowns and credit losses at financial institutions and sent the global economy into its first recession since World War II, according to data compiled by Bloomberg. Pimco, based in Newport Beach, California, is a unit of Munich-based insurer Allianz SE. -- Bloomberg ASIAN bank bonds 'look attractive' as markets recover from the global financial crisis, said Koyo Ozeki, head of credit research for the region at Pacific Investment Management Co, which runs the world's biggest bond fund. |
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