Income Fund Update: Capitalizing on the Global Opportunities in Fixed Income


  • High yields and global divergence are leading to one of the most attractive opportunity sets in global fixed income markets in recent history, in our view.
  • We have added to duration versus the start of the year and diversified outside the U.S. We believe fixed income offers a compelling return profile.
  • We are diversifying interest rate exposure into the U.K. and Australia, where we see attractive value versus the U.S. and stronger government debt dynamics.
  • We maintain a core holding in investment grade credit space, while moving up in quality with exposure to agency mortgages.

he path of interest rates has defied expectations, again, leading to multiple opportunities across fixed income markets around the world. Here, Dan Ivascyn, who manages the PIMCO Income Fund with Alfred Murata and Josh Anderson, talks with Esteban Burbano, fixed income strategist. They discuss how the portfolio is positioned for elevated bond yields, mixed inflation data, and global divergence.

Q: Starting at a high level, what is our global macro outlook for the next 12 months?

Ivascyn: Across the major economies, the U.S. stands out for its ongoing resilience. The U.S. economy is less rate-sensitive than most other markets, due partly to the prevalence of 30-year fixed-rate mortgages. When interest rates were lower amid the pandemic, homeowners were able to lock in low mortgage rates. Technological innovations, such as artificial intelligence advancements, are also spurring U.S. economic activity and equity markets.

However, high inflation and geopolitical conflicts as well as the lingering consequences of the pandemic have affected the European economy, as well as overall global sentiment.

The trajectories among major economies may potentially diverge. In the U.S., although growth likely peaked in 2023, a soft landing remains a clear possibility – and perhaps even a no-landing scenario of continued strong economic growth, though that isn’t our base case.