Pacific Investment Management Co. warns investors to diversify bond allocations amid yields at 24-year highs. Long-dated Treasury yields hover near 2002 peaks, with the 10-year at 5.25% and 30-year at 5.65%. The $2.33 trillion manager recommends spreading investments across developed and emerging markets to mitigate fiscal risks.
Pimco highlights the US and France as having challenging debt trajectories, while the UK, Italy, and Japan remain vulnerable. Economists Tiffany Wilding and Andrew Balls note attractive yields offer inflation mitigation. The firm maintains five- to seven-year Treasuries are attractive, becoming more constructive on longer-dated bonds as yields rise.
Last month, CIO Dan Ivascyn reduced underweight positions on long-term US debt above 5%. September marked the worst month for US Treasuries since October 2024, with a Bloomberg index falling 2.2%. Pimco cites AI infrastructure spending and steep energy costs as inflation drivers sustaining Fed rate hike prospects.
Additional fiscal stimulus could drive higher yields, though planned UK budget tightening may allow yields to fall.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing