'Governments are the new hedge funds' - PIMCO on credit risk

The global credit market has been turned upside down as sovereigns contaminate the market and governments become "the new hedge funds", according to PIMCO's Luke Spajic.

The head of the pan-European credit portfolio for PIMCO, which manages $1.7trn in its portfolios across the globe, warned investors to "keep credit positions close and your sovereign positions closer", noting the changing nature of fixed income investment risk. "The credit market has been turned upside down as we have moved from interest rate risk to credit risk. Sovereigns are the new risky creditors, credit is behaving like equity, banks are the new high yield, governments are the new hedge funds and policymakers are the new rainmakers," he said at the Morningstar Investment Conference...