(Bloomberg) -- Pimco may soon reconsider its underweight stance on long-duration government bonds that have already taken a big beating in the new-year selloff.
Geraldine Sundstrom, a portfolio manager focused on asset allocation strategies at Pacific Investment Management Co. in London, said Treasury yields are starting to look appealing after soaring more than 30 basis points since the start of 2022.
“Now with the selloff that we have seen and the improvement in the outlook we are coming closer to a fair area with what the market is pricing in terms of hikes by central banks,” Sundstrom said in an interview with Bloomberg TV Thursday. “It’s not like a bang the table, right here right now, but certainly coming into a zone where fixed income is becoming more attractive.”
The 10-year U.S. Treasury yield has climbed to as high as 1.87% in recent days with the Federal Reserve under pressure to tackle rampant inflation with faster rate hikes.
Sundstrom said the selloff in bonds, and the expectations of aggressive Fed policy action, may have gone too far. Some prominent voices have called on the central bank to push up rates by 50 basis points in March to regain control of price pressures.
Fed officials themselves expect three quarter-point increases in the benchmark federal funds rate this year, after holding borrowing costs near zero since March 2020.
Read more: Fed Doubles Taper, Signals Three 2022 Hikes in Inflation Pivot
“The pendulum has swung from no hike as far as the eye can see to the situation now where the market is probably going over its skis when it comes to thinking that it needs so much hiking and the situation is out of control,” Sundstrom said.
©2022 Bloomberg L.P.