PGIM unveils Global Total Return ESG Bond Fund
PGIM has further expanded its environmental, social and governance (ESG) offerings with the launch of the PGIM Global Total Return ESG Bond Fund.
Steering Through the COVID Fog
Feb 5, 2021
In its 1Q 2021 outlook, PGIM Fixed Income shares their views on the current economic environment and outlook for fixed income markets.
Each quarter, PGIM Fixed Income publishes an outlook describing their views on the economy, as well as their expectations for sectors within fixed income markets. Here’s where they see value (and where they don’t) in the coming quarter.
At a glance – PGIM Fixed Income sector views as of January 2021
| Sector | Outlook | Rationale |
|---|---|---|
| Developed Market Rates | Constructive | Some expectations for growth and inflation may be overly optimistic, prompting curve flattening in the U.S. and Australia. European and Japanese rates appear set to remain rangebound near recent levels amid more tepid recovery expectations and significant QE purchases. |
| Agency MBS | Opportunistic | Continued preference for spread sectors over MBS. However, the hedge-adjusted carry opportunities in production coupons relative to intermediate U.S. Treasuries remain relatively attractive, but not as much as in late 2020. Still appropriate to own back-month TBAs vs. intermediate Treasuries and to stay focused on specified pools away from Fed purchases. |
| Securitized Credit | Positive | Positive on high-quality spreads as near-zero policy rates and ongoing Fed purchases support a spread tightening environment. Wary of mezzanine risk for collateralized loan obligations and conduit commercial-backed mortgage securities, but find value in subordinates of select single-asset single borrower CMBS, asset-backed securities, and select non-agency credit risk transfer issues in the residential mortgage-backed securities market. |
| IG Corporate Debt | Positive | Positive in light of central bank support and the prospects for an economic recovery. Favor U.S. money center banks as well as select BBB-rated issues, cyclical credits, and fallen angels. |
| Global Leveraged Finance | Constructive | Constructive over the medium and long term. Spreads remain attractive and will drive strong returns for investors with longer term time horizons. Over the near term, the market will likely remain volatile. We believe actively managed credit selection will be a differentiating factor between managers. |
| Emerging Market Debt | Optimistic | Prospects for EMD performance are encouraging given the supportive backdrop, attractive valuations, and the global search for yield. Favor hard currency spreads, followed by FX amid a weak dollar theme, and select local bond markets that are poised to benefit from curve flattening. Significant headwinds in early 2021 may be avoided. |
| Municipal Bonds | Constructive | Constructive in the near-term based on supportive technicals. |
The full PGIM Fixed Income Market Outlook is available for financial professionals.
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For Professional Investors only. All investments involve risk, including the possible loss of capital.
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