MEXICO CITY (Reuters) - Bond giant PIMCO does not think Mexico’s peso is overvalued and sees good opportunities in high-yielding Brazilian local currency debt, a senior portfolio manager said on Friday.
Michael Gomez, co-head of emerging markets at Pacific Investment Management Co, said Mexico’s hands-off approach to its currency and markets had served it well, while Brazil should think about dropping its barriers to foreign investment.
“The Mexican peso doesn’t look like an overvalued currency by any stretch of the imagination. What the Mexicans have engineered with a currency that is relatively competitive is low inflation and higher growth,” he said in an interview with Reuters.
PIMCO has $100 billion worth of dedicated assets in emerging markets, including $116 million in its emerging market currencies fund (PLMAX.O).
Gomez said it was “anomalous” for local-currency Brazilian bonds to have nominal yields of more than 9 percent given rates in the rest of the world were so much lower, although this made them a good investment.
“Relative to the balance sheet, relative to the carry and relative to the fundamentals, onshore opportunities in local Brazilian markets make a lot of sense. Those are positions which may take a little longer to play out but we think you get paid to hold them,” he said.
Reporting by Krista Hughes; Editing by Diane Craft