US Treasuries retain safe haven status despite the downgrade of the United States’ credit rating, PIMCO bond manager Andrew Balls has said.
Speaking to Citywire Global, Balls, who manages seven funds on behalf of PIMCO, said that while many of the best investment opportunities were in emerging markets and large multi-national companies, US government bonds remained a secure bet.
‘We have strong balance sheets and high yield alternatives to the OECD government debt but in response to systematic pressures on global growth I would say the safe havens remain US Treasury bonds,’ he said.
His comments echo those of veteran investor Warren Buffett, who disputed Standard & Poor’s decision to strip the United States of its AAA-rating and told CNBC he was continuing to hold a large allocation of US Treasuries.
However Balls, taking a similar tack JP Morgan’s Nick Gartside, also singled out Australian government bonds as an attractive investment prospect in the current environment.
Furthermore, he also pointed to potential in the Canadian, Mexican and Brazilian markets off the back of wider global issues.
‘Canada is another one which has quality balance sheets,’ he said. ‘We have also got countries like Brazil and Mexico, where real interest rates are high over the next few years. I expect Mexico or Brazil to be very good investments.’
Looking ahead, Balls questioned the S&P decision to downgrade the United States - a move which has already drawn considerable ire for the credit rating agency.
‘If the US isn’t triple-A rated what is?’ he said. ‘Over multiple years, the role and importance of the US in the global market will diminish but, for the time being, it is still the most liquid and developed.’
Andrew Balls is just approaching the point at which he has posted the necessary track record to qualify for a Citywire Fund Manager Rating - the latest ratings will be released this week.