Pimco: 'Credit Loss Cycle' Has Begun, Prefers High-Quality Bonds

Pacific Investment Management Co. (Pimco) has warned that heavy spending on artificial intelligence could widen economic disparities and negatively impact lower-quality borrowers. The firm stated that a 'credit loss cycle' has begun and urged investors to shift toward high-quality bonds. According to Pimco's analysis, the surge in AI investments may deepen economic divergence, increasing the default risk for borrowers with lower credit ratings. This could lead to rising losses in credit markets. The company emphasized that investors should seek safer havens in the current environment, noting that high-quality bonds are likely to be more resilient during a potential credit crunch. Pimco's warning is being closely monitored in global bond markets. Investors are reassessing credit risks alongside central bank interest rate policies and economic growth signals. This is not investment advice.