NEWPORT BEACH, CALIF., July 31, 2003 (PRIMEZONE) -- PIMCO Strategic Global Government Fund, Inc. (NYSE:RCS) today released its investment performance results and statistical portfolio information for the period April 1, 2003 through June 30, 2003 (second 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 $348 billion of assets under management as of June 30, 2003, 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 06/30/03
3 6 1 3 5
Mos Mos Year Years(1) Years(1)
RCS Based on
Net Asset Value (%) 3.45 6.51 13.12 12.91 9.36
Based on NYSE
Share Price (%) 4.50 3.83 11.93 19.83 13.05
Lehman Intermediate
Aggregate Index (%) 1.89 3.19 8.74 9.52 7.42
(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
------------ ---------------- ---------------
06/30/2003 $11.79 $11.59
03/31/2003 $11.50 $11.42
06/30/2002 $11.51 $11.20
Date Premium/(Discount) to Net Asset Value
---- -------------------------------------
06/30/2003 1.73%
03/31/2003 0.70%
06/30/2002 2.77%
Dividend Information
--------------------
Regular monthly dividend per share: $0.074
Total dividends declared in the quarter: $0.222
Annualized dividend yield at
6/30/03 based on NYSE share price: 7.53%
Annualized dividend yield at
6/30/03 based on net asset value: 7.66%
Portfolio Statistics
The Fund's investment portfolio had the following characteristics
as of June 30, 2003:
Net Assets: $413.9 million
Average Duration: 3.5 years
Average Maturity: 5.17 years
Quality Ratings: 82% AAA, 0% AA, 0% A, 5% BBB,
8% BB, 4% B, 1% less than B
Average Quality: AAA
Sector Weightings: 66.4% Mortgage-Backed (51.1% FNMA, 7.3% GNMA,
7.2% FHLMC, 0.8% Other), 9.0% Emerging Markets
(2.0% Brazil, 0.3% Chile, 1.6% Russia, 0.8%
Ecuador, 1.8% Mexico, 0.7% Panama, 1.2% Peru,
0.3% Malaysia, 0.3% Tunisia), 31.6% Cash and
Equivalents, -7.0% U.S. Treasury/Agency
Market Commentary
Mortgage-backed securities performed near Treasuries on a like-duration basis in the second quarter, struggling to keep pace amid the torrid pace of refinancing. Within the mortgage sector, performance was mixed, with lower coupons outperforming Treasuries as demand remained strong. Conversely, higher coupon issues lagged, as these securities were vulnerable to record prepayments.
Treasury yields fell in the second quarter as the expected postwar economic pickup failed to materialize. In response to lackluster economic news, investors pushed already low yields to levels not seen in 45 years, confounding investors convinced that these bonds were overvalued. The yield on the benchmark 10-year Treasury neared 3% before closing at 3.4%, down 0.28% in the second quarter. Buyers were encouraged by signs that inflation would remain low, due to low capacity utilization and weak employment growth. Asian central banks bought Treasuries to limit the rise in their currencies versus the dollar in an effort to protect their export industries. Buyers of Treasuries and corporate debt benefited from the Federal Reserve's commitment to act preemptively to avert deflation. Late in the quarter, the Fed backed up that commitment, cutting the federal funds rate by 0.25% to 1%.
Mortgage rates also declined during the quarter, with yields on FNMA 5.0% coupon 30 year pass-throughs falling from 4.89% at the beginning of the quarter to 4.17% in May, a record low, before trending higher and ending the quarter at 4.44%. Mortgage prepayments rose to record levels during the quarter, especially for higher coupon mortgages. These prepayments caused the average duration on mortgage securities to contract during the quarter as investors anticipated a rapid return of principal. Falling durations limited principal appreciation potential on mortgages.
Despite heavy prepayments and falling durations, mortgages continued to be supported by strong technical factors during the quarter, including crossover demand from the banking sector. Banks continued to buy mortgages in lieu of making commercial and industrial loans. For the banks, mortgages continued to offer attractive yield premiums and strong credit quality relative to loans and to their cost of capital. This strong demand helped to sustain mortgage security prices despite weakening fundamentals.
The first half of 2003 witnessed an intensification of the favorable secular repricing trend in emerging markets fixed income, causing a reduction in risk spreads reflecting supportive economic fundamentals and liquidity conditions. Of particular note was the manner by which the Emerging Markets asset class deepened its process of acceptance among institutional and retail investors, anchored by solid economic and financial conditions in most, though not all, emerging countries.
The more broadly recognized EM secular trends also attracted investors with shorter-term investment horizons who tend to invest in the asset class as a whole rather than distinguish among individual country credits based on fundamentals. Accordingly, the rally was accelerated and generalized across the asset class, taking several credits to valuation levels no longer warranted by underlying fundamentals, as well as heightening the sensitivity of the asset class to external events.
On a positive note, given the return of overall investor risk appetite, many countries have been successful in covering the majority of 2003 external funding requirements, allowing for a more positive technical backdrop for the remainder of the year.
In particular, "high beta" country credits such as Brazil and Ecuador drove strong performance in the region following improvement in economic fundamentals and continued cooperation with multilateral organizations.
Political noise related to the 2004 elections in Panama was offset by increasing evidence of an economic recovery, which allowed for solid quarterly gains. Similarly, political noise culminating in a cabinet reshuffling contained gains for the quarter in Peru. Mexico's continued convergence with the U.S. and investment grade corporate credit markets resulted in solid quarterly performance.
Russia continued to benefit from high oil prices, leading to increased domestic growth and a rising level of international reserves.
For further information, please contact Jeff Sargent, PIMCO Strategic Global Government Fund, Inc., at (949) 720-4712.
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.