Pimco Fund Manager: Fixed Income Returns Could Reach 7%-8% Over the Coming Years
nashnova research
Dan Ivascyn, lead manager of the $222 billion Pimco Income Fund — the world's largest actively managed bond fund — says yields are near a 25-year high and bond portfolios can deliver 7%–8% returns over the next several years.
Where does the 7%–8% forecast come from?
Speaking at a New York conference hosted by Grant's Interest Rate Observer, Ivascyn said investors can build a high-quality portfolio locking in the highest yields in 25 years.
This means → he is not betting on a big bond-price rally; he is betting that the starting yield itself is high enough to deliver returns just by holding to maturity.
The Pimco Income Fund currently carries a portfolio yield of roughly 5.5%, an average maturity of 10 years, and $222 billion in assets.
Why load up on mortgage bonds and avoid corporates?
The fund is heavily overweight mortgage-backed securities — MBS, bonds created by bundling large pools of home loans: agency MBS account for 36% of the portfolio, non-agency MBS for 17%; investment-grade and high-yield corporate bonds together make up just 9%.
In plain terms = Ivascyn thinks mortgage bonds are cheaper — agency MBS yield more than one percentage point above 10-year Treasuries, while corporate-bond spreads sit at historic lows, offering too little extra return for the risk.
He is cautious on the wave of bond issuance tied to data centers and AI, saying he needs more layers of credit protection before buying.
Why bearish on the dollar and bullish on emerging markets?
Ivascyn views the dollar as "overvalued" against other major currencies and expects a gradual depreciation, advising clients to diversify globally to hedge U.S. fiscal-deficit risk.
The fund holds 10% of its portfolio in emerging markets; he singled out Brazilian local-currency bonds as a favored position.
This means → the verification test is straightforward: a weaker dollar plus EM local-currency bonds outperforming — if either leg fails, the allocation thesis loses force.
How is the fund performing right now?
Year-to-date return stands at negative 1.8%, with an annual fee of 0.5%.
In plain terms = short-term numbers are not flattering, but Ivascyn is betting on multi-year carry returns, not near-term price gains — the current loss reflects bond-price volatility, not a breakdown in the yield-to-maturity logic.
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