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What’s Next for Interest Rates?

Many investors are naturally wondering about the effect changing interest rates could have on their fixed income portfolios. Learn more about PIMCO’s current outlook for interest rates and how we think investors can position for the environment ahead.

  • Lower trend growth underpins our expectation for range-bound interest rates.
  • Our secular baseline outlook foresees a recession – not imminent, but likely over the next three to five years.
  • Central bank policy rates should go to zero quickly in such a scenario and stay there for an extended period.
  • Downside risks to the economy – from more tariff action, trade wars, growth shocks or declining confidence –may loom large.
  • The U.S. has the highest yields globally from which to benefit while gaining diversification away from higher risk assets. It also has the most room for rates to fall in the wake of a downside risk materializing.

Bottom line: U.S. interest rate exposure may offer longer term capital appreciation potential, and may be the best way for investors to hedge credit or equity risk in portfolios today.

Read more on our outlook for rates >

What’s Next for Interest Rates?

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How do rates affect bond performance?

When it comes to bonds, the role of interest rates is often less well understood. For investors who want to build a deeper understanding of the fixed income market, the relationship between bonds and rates is critical knowledge.
5 MIN.

Understanding Investing

Bonds

The bond market is by far the largest securities market in the world, providing investors with virtually limitless investment options. Many investors are familiar with aspects of the market, but as the number of new products grows, even a bond expert is challenged to keep pace. Once viewed as a means of earning interest while preserving capital, bonds have evolved into a $100 trillion global marketplace that can offer many potential benefits to investment portfolios, including attractive returns. Before tackling the complexities of this huge and diverse market, it is important to understand the basics: What is a bond and how can bonds help meet your investment goals?