Outside the U.S., Mather favors taking similar positions to benefit from steep yield curves in bond markets that have followed the run-up in the U.S., including Europe and Australia.
Australia’s central bank will probably lower its benchmark rate to at least 2 percent from a record low 2.5 percent by early next year, he said. The Aussie dollar may fall toward 80 U.S. cents from about 90 now, Mather said.
The yield differential between 2- and 10-year bonds in the nation climbed to 1.55 percentage points yesterday, the most since July 2009.
Pimco favors “strategies to take advantage of the steepness of the curve both in the U.S. and elsewhere in the world, particularly in places like Europe and in Australia, where they’ve been dragged along with the U.S. for no good reason,” said Mather. “Yes, the selloff is overdone, so duration is attractive but curve is even more attractive in our view.”