Bond managers urge investors to put their cash reserves to work

investmentnews.com:

For investors stashing record sums in cash, US bond managers overseeing a combined $2.5 trillion have a bit of advice: It’s time to put that money to work.

That’s the message from Capital Group, DoubleLine Capital, Pimco and TCW Group. And it comes as many fixed-income managers are still licking their wounds following a tough year that’s seen the bond market trail ultra-safe T-bills and money funds carrying the highest rates in decades.

For these West Coast bond managers, this month shows the risk of staying in cash too long. Signs of ebbing inflation and softer growth have fueled a 3.4% surge in the Bloomberg US Aggregate Index in November, bringing it back to about flat for 2023 as of Nov. 17. That’s still well short of what cash has earned this year. But it shows what a real turning point could deliver after a year marked by head fakes over price pressures and Federal Reserve policy. 

The asset managers said in interviews last week that they’re comfortable buying Treasuries and other high-quality bonds at levels they finally see as attractive. And they generally agreed on extending interest-rate risk as far as the five-year area of Treasuries, while also owning mortgage debt, which they consider cheap.

“My sense of things right now is that 4 1/2 to 5% is a safe place to be buying bonds,” said Greg Whiteley, head of government securities investing at DoubleLine.

He likes Treasuries due in around five years because he says the segment has scope to gain as traders price in more Fed cuts. The area is also less vulnerable than longer maturities given worries about US deficits and borrowing needs, as well as sticky inflation.

Treasuries are on pace to halt a six-month slide. Ten-year yields tumbled below 4.4% at one point