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Scott Mather, head of global portfolio management at PIMCO, gives his views on the climate for bond investing here.

In general, Mather sees a fairly bond-friendly investment climate going forward, due to a backdrop of low growth and benign inflation. He acknowledges that there are tail-risk scenarios worth considering: on the one hand, the possibility of hyperinflation due to massive monetary expansion, and on the other, a deflationary cycle similar to that of Japan. He sees the balance of risk falling towards the deflationary/disinflationary possibility.

Even in an environment where the inflation/rates and growth outlooks are benign, a headwind for bonds is the credit issue: namely, the deterioration of fiscal positions for developed countries, which is not happening in emerging countries. Mather sees the long-term secular outlook for emerging markets as positive, but still prefers to hold on to only high-quality credits at this stage, as these outperform whenever risk gets repriced.

On a country-specific basis, Mather has a favorable opinion of European bonds relative to U.S. bonds--he prefers France and Germany to the U.S., as they have similar yields but a much better debt dynamic: lower deficits, debt:GDP ratios, similar growth, and no headwinds from ending quantitative easing (which might cause demand/supply imbalances). Like Gross, Mather sees the UK as a must to avoid, with the added point that the UK is more dangerous than the U.S. because the pound doesn't have the advantage of a reserve currency status. Finally, he gives his view on Japan:

"There is virtually no conceivable way that Japan can get its debt dynamics under control through normal ways – and that means it will resort to either default or inflation through massive monetization, and yields are low. It might muddle through in the short-term, but in the long-term it has problems."