Pimco says the extra compensation investors require to hold long-dated government bonds—often called the term premium—is likely to remain elevated. The firm argues that this support for yields, absent an unexpected economic downturn, makes bonds more attractive for investors seeking duration exposure.
Pimco also frames current yield levels as being high mainly when compared with the unusually low rate environment that followed the global financial crisis, when policy rates were kept down for an extended period. In that view, today’s yields are not necessarily extreme on a longer historical basis, but they reflect a different backdrop in which the term premium has not fully normalized.
Bloomberg emphasizes the forward-looking expectation that the term premium will stay elevated unless growth deteriorates unexpectedly, while the Japan Times focuses more on the comparison to the post-crisis period of artificially suppressed rates. Both outlets convey Pimco’s message that current bond yields offer value relative to that prior regime.
