PIMCO

Can U.S. companies absorb higher refinancing costs? For most investment grade and high yield issuers, interest coverage remains robust. But the outlook is more challenging for CCC rated borrowers. Lotfi Karoui breaks it down in his latest edition of The Credit Market Lens.

Price stability took center stage at Jackson Hole. Former Vice Fed Chair Richard Clarida analyzes Chair Warsh's remarks on inflation, financial conditions, and the economic outlook as the next Fed meeting approaches. Read More. https://lnkd.in/ez72MQRj

The U.S. Treasury’s decision last week to increase buybacks raised questions about its commitment to a “regular and predictable” framework. Buybacks can improve market liquidity and provide support during periods of stress, but the Treasury can't control the broader forces driving long-term yields. In this week’s Macro Signposts, Tiffany Wilding explains how a regular and predictable, yet flexible, framework could support market stability over time. Read now: https://pim.co/9d70e3

A meaningful career begins with meaningful experience. Applications are now open for PIMCO's Summer Internship Program. Interns will have the opportunity to contribute to significant projects, work alongside industry experts, and gain hands-on experience from day one. Through an immersive learning environment that values curiosity, collaboration, and diverse perspectives, you'll build a strong professional foundation while developing the skills and insights to help shape your future. Apply today: https://pim.co/26a72d

Why are long-term bond yields rising? In the latest PIMCO Perspectives, Marc Seidner and Pramol Dhawan examine the forces behind the rise in 30-year yields, including growing sovereign debt, increased AI-related corporate bond issuance, and persistent inflation concerns. The recent moves have restored yields near their long-term averages, offering opportunities for long-term investors. Read PIMCO Perspectives: https://pim.co/66e127

As the credit cycle ages, understanding default activity across public and private markets is becoming increasingly important. New analysis from PIMCO suggests that financial distress in direct lending portfolios has risen significantly since 2022, even as traditional default measures may not fully capture underlying stress. In this week’s edition of The Credit Market Lens, Lotfi Karoui shares the five-part framework used to assess direct lending distress and how trends compare across leveraged finance markets. Read it here:

In his latest piece in the Financial Times, Richard Clarida examines why measures of “underlying” inflation should look beyond inflation data alone. Core, trimmed mean, and sticky-price inflation measures each offer useful information. But Clarida argues that unit labor costs, or wage gains adjusted for productivity growth, provide an important labor-market signal. Recent data show unit cost inflation has averaged 2% over the last four years and 1.5% over the last year. Inflation remains too high, but the labor market is not the source of underlying inflation today. Read more: https://pim.co/c3f5fa

Why are wage gains slowing while unemployment is declining? New analysis from Tiffany Wilding and Graeme Westwood suggests workforce composition plays an important role. Household survey data indicate that a growing share of higher-wage workers are transitioning out of full-time employment, contributing to softer measured wage growth and a labor market that appears less inflationary than headline unemployment data alone may imply. Read this week’s Macro Signposts: https://pim.co/2b5caf

Markets for business development companies (BDCs), among the largest providers of direct lending capital, continue to serve as an important barometer of investor confidence in direct lending valuations.   While BDC bonds have recovered much of their recent underperformance, BDC equities continue to lag. Lotfi Karoui explores the implications in the latest edition of The Credit Market Lens.

The U.S. labor market is sending mixed signals. The unemployment rate has moved lower, yet so has wage growth, labor force participation, and the ratio of employment to overall population. Tiffany Wilding’s latest analysis suggests labor supply dynamics, including a wave of retirements, may help explain the disconnect. Read this week’s Macro Signposts: https://pim.co/24efc0