Pimco Eases Up on Treasury Underweight as Long Yields Hover Around 5%

What changed at Pimco

With a global bond selloff pushing longer-dated U.S. yields toward their highest levels in roughly 20 years, Pimco is nudging its positioning toward neutral. Chief Investment Officer Daniel Ivascyn said the firm is dialing back its underweight in long Treasuries, while also paring a previously bullish view on five- to seven-year maturities and toning down its bearish posture on the long end.

This is notable for Pimco - which oversees about $2.3 trillion - because in recent years it has been wary of long-maturity Treasuries on account of budgetary risks. Back in June, the firm emphasized intermediate maturities. "A lot of the fiscal challenges are priced into the market here and it's not just a US phenomenon," Ivascyn said, adding, "It's not that we have great comfort in the fiscal situation in a narrow sense, but we think at these kind of yield levels, and inflation adjusted yields, there's now better value."

Why yields are where they are

Ivascyn pointed to Middle East tensions lifting oil prices and to inflation that has stayed over the Fed's goal for five years as reasons the bond market's skepticism makes sense. He anticipates the conflict - together with efforts aimed at reopening the Strait of Hormuz - will keep yields under upward pressure through the end of the year.

He also flagged a backdrop of heavier U.S. borrowing and a wave of issuance to fund AI buildouts as a tailwind for fixed income, noting, "When governments or corporations need to borrow more, we get to charge them a higher rate." He described Treasury Secretary Scott Bessent's stepped-up buybacks of older bonds as something that only marginally influences the long end. "There's always a chance that you could get some policy response that could serve as a catalyst to stronger performance, but we're not counting on it," he said.

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What this means for your portfolio

"If you have an intermediate time horizon, there's good value," Ivascyn said, adding the current setup calls for "diversification and patience at the moment." For those looking further out, he sees yields north of 5% as appealing, especially if the Fed continues to raise rates to tame inflation.

Results help explain why this recalibration matters: the Pimco Income Fund's slight 0.3% decline in 2024 still puts it ahead of most broad-market peers, and over the past one, three and five years it has outpaced more than 90% of competitors, per Bloomberg data. If bond yields stay elevated into year end, a more balanced stance from a heavyweight like Pimco is a useful tell on where risk and reward may be lining up for everyday savers watching their fixed-income options.

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