Balanced risks to inflation and employment indicate it’s time for the Fed to normalize interest rates, enhancing a positive backdrop for bonds.

In this PIMCO Perspectives, we explore the dispersion playing out across monetary policy and financial markets.

This PIMCO Perspectives assesses how the term premium’s 40-year downturn could start to reverse.

Strength in employment and inflation has caused markets to raise the implied terminal rate while still expecting the Fed to normalize policy – which is different from easing – in 2024.

How we’re thinking about investing against a backdrop of inflation uncertainty, geopolitical tension, and likely recession.

Uncertainty always exists in financial markets.

As regulators push to transition away from Libor, sales of Treasuries linked to the successor rate could boost the new benchmark’s credibility and expand nascent markets for related debt and derivatives.

Longer-dated Treasury yields have climbed as markets consider whether economic growth and inflation expectations might accelerate more rapidly. We believe inflation pressures will remain in check and bond yields will be range-bound.

How can investors navigate volatility arising from late-cycle fiscal stimulus?

Untethered to traditional bond benchmarks, unconstrained bond strategies can respond to current changing market conditions in various ways.