PIMCO Buying Bank Debt - Good Trade

I hate to say it, but "good call!" to PIMCO on buying bank bonds.  I could not agree more that there is value in bank debt - I am still staying at senior level, but sub level could be an interesting bet.

Some levels:
BAC '21s  +240
C   '20s  +185/10s
JPM  '18s  +80/10yr

Pacific Investment Management Co., manager of the world’s biggest bond fund, is betting the rally in U.S. bank bonds is set for further gains with economic growth ready to accelerate next year.

Bank of America Corp. and Citigroup Inc. are poised to be “two of the stars” in fixed-income markets in 2011, said Mark Kiesel, the global head of corporate bond portfolio management at Pimco in Newport Beach, California. The largest U.S. lenders are an attractive value compared with “every bank you can buy in the world,” he said.

Pimco, which boosted its forecast for economic growth last week, reaffirmed its conviction in bank bonds after the securities returned 7.62 percent this year, lagging behind the gain of 7.95 percent for investment-grade company debt, Bank of America Merrill Lynch index data show. Lenders and other U.S. corporate borrowers will benefit as the economy revives following President Barack Obama’s agreement to extend tax cuts, Kiesel said.

“That was the catalyst that sparked upward revision in growth,” said Kiesel, who was nominated for fixed-income manager of the year by Morningstar Inc. “That Obama is showing some indication he’s willing to move more toward the center, that’s net-net going to be marginally more positive for business.”

Disclosure:  Long BAC and C common and preferred. - If I like the lower parts of the cap structure, the fundamental thesis is there.  I think the value is too.