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Pimco has become more hesitant to buy long-term American government debt as the $2tn US bond fund manager frets over “sustainability questions” and the prospect of rising inflation under Donald Trump.
The bond giant said in a note on Monday that it was cutting its exposure to long-dated US debt because of what it termed deteriorating deficit dynamics, instead favouring shorter-term notes “where investors can find attractive yields without taking greater interest rate risk”.
Pimco’s chief investment officer of non-traditional strategies Marc Seidner and portfolio manager Pramol Dhawan are expecting US debt levels to keep rising from already high levels. The US federal budget deficit reached $1.8tn for the fiscal year ending September 30, up 8 per cent from the previous year.
Any further increase would,…
