Pimco sticks to Danish mortgage-backed covered bonds as returns plunge: Bloomberg
Ticker and trading information for Pacific Investment Management Co. (PIMCo) are displayed on a screen at the New York Stock Exchange (NYSE) in New York, U.S., April 5, 2018. REUTERS/Brendan McDermid
NEW YORK (Reuters) – Pacific Investment Management Co is one of the investors embracing Danish mortgage-backed covered bonds, even as negative interest rates mean investors face built-in losses on some bonds, Bloomberg reported on Sunday.
“We like the asset class,” said Peder Beck-Friis, a portfolio manager and economist at Pimco in London, referring to the $500 billion market. “We are overweight, as we have been for a long time. And that certainly hasn’t changed now that some of them have turned negative in terms of yield.”
Bloomberg also cited data from Danske Bank (DANSKE.CO), Denmark’s largest lender, that showed mortgage-backed bond issuers are offering up to six times as many fixed-rate bonds a day as during a more normal cycle.
The bonds are “a triple A rated high quality asset with fairly good liquidity,” Beck-Friis said.
“Given that profile, it actually offers a very good return,” he said. “So I don’t think there’s anything special about the zero. As an investor you are looking for the highest returns given risk profile. The level of that may shift over time but ultimately you need to place your money somewhere,” Bloomberg quoted Beck-Friis as saying.
Reporting by Gertrude Chavez-Dreyfuss; Editing by Peter Cooney