Weighing The Risks

Jason Duko of PIMCO - Global Credit: High Yields or High Risk?

Episode Summary

This week, Rusty Vanneman and Nick Codola talk with Jason Duko, a Portfolio Manager at PIMCO. Mr. Duko is an executive vice president and portfolio manager in the Newport Beach office focusing on U.S. leveraged finance, including bank loans and collateralized loan obligations (CLOs), high yield and multi-sector credit strategies. Prior to rejoining PIMCO in 2023, he was at Ares Management, where he was a partner and portfolio manager responsible for managing U.S. bank loan credit strategies. He was at PIMCO from 2011–2018, managing bank loan portfolios and responsible for secondary loan trading across all sectors. Previously, he held roles at Lord Abbett, Nomura Corporate Research and Asset Management (NCRAM) and ING Pilgrim Research. He has 25 years of investment experience and holds an undergraduate degree in finance from Arizona State University.

Episode Notes

This week on Weighing the Risks we will take a closer look at the Corporate Bond market and how tight credit spreads are, relative to long term averages. We consider what these risks might mean not only for the bond market, but for the economy and stock market overall. Learn more at orion.com.

Key Takeaways

[02:00] - Jason’s professional background and what he focuses on, specifically, at PIMCO.
[03:30] - What were the key takeaways from PIMCO’s Cyclical and Secular Outlook Summit and how might these impact the global credit markets? Will defaults continue to tick up, what are the odds of high yield spreads widening to historic levels and how might this affect the markets?
[07:03] - In the current high yield market there is a record amount of BBs – is this a factor in why the credit spreads are so tight? Also, does this reflect a structural shift in the market or is it just part of the cycle?
[09:03] - Is a potential upcoming debt wall a greater concern for investment grade than for high yield or is this concern overblown?
[12:35] - What areas of the global credit market might offer the most value right now? Also, are people overweighting or underweighting high yield at the moment in Jason’s experience?
[18:22] - What are some potential risks that advisors and investors might not be accounting for right now?
[21:32] - A baseline market forecast and how probable Jason thinks this is.
[26:52] - A good case market forecast and how probable Jason thinks this is.
[29:32] - A negative case market forecast and how probable Jason thinks this is.
[32:05] - Other risks that investors should be thinking about that we haven’t yet addressed.

Quote

[03:43] ~ “Last year was an incredible year for the US across most markets and that momentum has carried into 2024 to start the year. It’s really being driven by a really resilient economy. Despite the moving rates, the US consumer remains healthy. There’s just overall been really great momentum in the economy and what we are really seeing this year is kind of a broadening of that strength…I think the key question is, with all of this kind of priced in, what does that really mean [going forward]?” ~ Jason Duko

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