IN THE NEWS
Pimco Warns of More US Regional Bank Failures on Property Pain.
- Banks selling quality assets first to avoid big losses
- Pimco has been amassing property portfolios for 18 months
This is a recent headline from Bloomberg: Pimco was founded in 1971 by Bill Gross, Bill Podlich, and Jim Muzzy. Anything that comes from Pimco catches my eye. While Bill Gross was famously pushed out, the company he helped found is still a very good bond shop. You can speak to Pimco’s reputation as the ‘best’ bond shop on the ‘street.’ This refers to Pimco’s focus on what is known as fixed income or bonds. As many of you know, the bond market is huge, including a large mortgage and asset-backed bond market, which this headline refers to. The term ‘asset-backed’ refers to a bundle of individual loans put together and sold to investors.
This article wrongly warns that smaller banks, known as regional banks, could fail due to exposure to commercial real estate. Failing means not having enough assets to cover the deposits needed by federal regulation. We just do not see that in the data. Before someone stops paying their commercial loan, they start making the payments late, which the Fed tracks as delinquencies. We are just not seeing an unusual rate of late payments.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Private Wealth Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. Comments concerning past performance are not intended to be viewed as an indication of future results.