NEWPORT BEACH, Calif., Oct. 21, 2004 (PRIMEZONE) -- PIMCO Strategic Global Government Fund, Inc. (NYSE:RCS) today released its investment performance results and statistical portfolio information for the period July 1, 2004 through September 30, 2004 (third quarter).
PIMCO Strategic Global Government Fund, Inc. ("RCS" or the "Fund") is a closed-end, intermediate-term bond fund whose primary objective is to generate a level of income higher than that generated by high-quality, intermediate-term U.S. debt securities. Pacific Investment Management Company LLC ("PIMCO"), an investment adviser with more than $415 billion of assets under management as of September 30, 2004, is responsible for managing the Fund's investment portfolio.
Investment Performance, Price and Dividend Information
The Fund's valuation and investment performance information are as
follows:
Performance for the periods ended 9/30/04
3 6 1 3 5 10
Mos Mos Year Years(1) Years(1) Years(1)
RCS Based on
Net Asset
Value (%) 4.17 1.39 6.34 8.67 9.78 8.73
RCS
Based
on NYSE
Share
Price (%) 16.74 -2.57 9.12 12.91 16.12 11.47
Lehman
Intermediate
Aggregate
Index (%) 2.69 0.66 3.38 5.40 7.11 7.25
(1) Annualized
The Fund's total return investment performance is net of all fees and
expenses and assumes the reinvestment of dividends.
Price Information
Pricing Date NYSE Share Price Net Asset Value
------------ ---------------- ---------------
9/30/2004 $11.90 $11.14
6/30/2004 $10.40 $10.91
9/30/2003 $11.82 $11.36
Date Premium/(Discount) to Net Asset Value
---- -------------------------------------
9/30/2004 6.82%
6/30/2004 -4.67%
9/30/2003 4.05%
Dividend Information
--------------------
Regular monthly dividend per share: $ 0.074
Total dividends declared in the quarter: $ 0.222
Annualized dividend yield at 9/30/2004
based on NYSE share price: 7.46%
Annualized dividend yield at 9/30/2004 based on net
asset value: 7.97%
Portfolio Statistics
The Fund's investment portfolio
had the following characteristics as of September 30, 2004:
Net Assets: $400.5 million
Average
Duration: 3.5 years
Average
Maturity: 2.1 years
Quality
Ratings: 80% AAA, 0% AA, 1% A, 8% BAA, 9% BA,
0% B, 2% less than B
Average
Quality: AA+
Sector Weightings
(see Note): 107.0% Mortgage-Backed (61.0% FNMA,
15.0% FHLMC, 7.0% GNMA, 24.0% Other
Mortgages), 13.0% Emerging Markets
(3.3% Brazil, 2.5% Mexico, 2.0% Russia,
1.7% Peru,1.3% Ecuador, 1.0% Panama,
0.4% Malaysia, 0.4% Chile, 0.4% Tunisia),
12.0% Cash and Equivalents, 1.0% Non-U.S.,
-33.0% U.S. Treasury/Agency.
%Leverage
(9/30/04): 28.6% (The Fund's use of leverage is
subject to change at any time.)
(Note) Total may exceed 100% due to rounding.
Market Commentary
During the third quarter, the Fund's investment portfolio of mortgage-backed securities and emerging market bonds returned 4.17% based on net asset value and 16.74% based on the Fund's NYSE share price. In comparison, the Lehman Brothers Intermediate Aggregate Bond Index (which includes Treasury, investment-grade corporate, and residential mortgage-backed securities) returned 2.69% for the same period. The Fund maintained an uninterrupted and constant dividend throughout the third quarter, holding the monthly per share rate steady at $0.074. These dividend payouts equate to an annualized dividend yield of 7.46% based on the Fund's September 30, 2004 NYSE share price.
As fears of an aggressive Fed tightening campaign subsided, mortgages outperformed like-duration Treasuries modestly during the third quarter and have outperformed for the year-to-date. Strong demand from banks and other financial institutions helped support the sector.
Demand for "carry," or the excess yield mortgages provide above borrowing costs remained the primary driver of mortgage valuations despite the modest flattening of the yield curve. Although some models show mortgage-backed securities ("MBS") as rich relative to Treasuries, the sector remains attractive to banks and other financial institutions as long as the shape of the curve, measured as the difference in yield between the 2-year and 30-year treasury, remains relatively steep. Banks, who finance higher yielding mortgages by borrowing at low short-term rates, still earn a significant spread on their investments in the current environment.
Investors were concerned that a continued fall in rates had the potential to meaningfully increase prepayments and to shorten mortgage durations. This concern was mitigated at the end of the quarter however, as rates increased and the likelihood of large increase in mortgage prepayments was reduced.
The MBA Refinancing Index increased only modestly despite the drop in mortgage rates. The index, which measures refinancing volumes, began the quarter at 1,386 and ended the period at 2,211, was up over 59% but well below the levels reached in the early part of the year. Prepayment speeds remained relatively stable during the period, although payments on lower coupon mortgages continued to be high relative to historical trends, supported by the robust housing market.
Within the mortgage market, higher coupons outperformed lower coupons, as banks moved into higher coupon MBS to increase carry and to reduce their overall duration exposure. In addition, 15-year mortgages significantly outperformed 30-year issues and GNMA securities modestly underperformed conventional pass-throughs. Non-index mortgages, including ARM's, private label mortgages, and CMO's generally underperformed agency mortgages on a duration-adjusted basis.
Among higher-quality Emerging Market countries, Mexico and Russia benefited from the high oil prices and were among the best performers in this sub-sector. After lagging the market in the second quarter, as the largest and most liquid names underperformed in the global deleveraging trade, the two countries returned 6.4% and 5.8%, respectively, in the third quarter.
Brazil also had strong returns for the quarter, as the country continued to report better-than-expected economic data and was upgraded by all three rating agencies. The upgrades to BB- by both S&P and Fitch, and to B+ by Moody's contributed to a strong quarterly return of 14.9% for the country.
For further information, please contact Erik Velicer, PIMCO Strategic Global Government Fund, Inc., at (949) 720-4733.
Past performance is no guarantee of future results. Investment return, dividend rate and share price will fluctuate so that shares, when sold, may be worth more or less than their original cost.