Pimco’s Bond King Sees Fixed-Income Returns as High as 8% With Yields Near 25-Year Highs

Dan Ivascyn, Pimco’s bond king. (Kyle Grillot/Bloomberg)

Key Points

• Pimco Income Fund manager Dan Ivascyn predicts bond returns as high as 8% and yields near 25-year highs over the next five years.
• The $222 billion Pimco Income Fund is tilted heavily toward mortgage securities and away from corporate bonds.
• Ivascyn expects steady depreciation for the U.S. dollar and advises clients to diversify globally to address federal deficit concerns.

The lead manager of the world’s largest actively managed fixed-income fund, the Pimco Income Fund , says bond returns of 7% to 8% are possible in the coming years supported by yields near 25-year high.

And Pimco bond king Dan Ivascyn is confident that bonds will offer superior returns to many other asset classes.

“We can put a 7% or 8% on the board,” Ivascyn told the audience at a conference in New York sponsored by Grant’s Interest Rate Observer. ‘You can put together a high-quality portfolio and generate the highest yields in 25 years.”

Ivascyn’s Pimco Income Fund, a go-anywhere multisector bond fund with $222 billion in assets, now carries a yield of about 5.5% and an average portfolio maturity of 10 years.

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The nearly 20-year-old fund is tilted heavily toward mortgage securities, notably agency securities issued by Fannie Mae and Freddie Mac, and away from corporate bonds, both investment-grade and junk.

Ivascyn’s view is that agency mortgage securities, now yielding more than a percentage point above the 10-year Treasury note, offer better value than high-grade corporate bonds that trade at historically tight yield premiums above Treasuries.

Agency mortgage securities made up 36% of the portfolio and nonagency mortgage securities another 17%. That compares with 9% for investment-grade and high-yield corporate bonds combined, according to the fund’s Sept. 30 fact sheet.

The flagship Pimco fund has returned negative 1.8% so far in 2026 in a tough year for most fixed-income markets. It has an expense ratio of 0.5% annually.

Ivascyn is wary of the huge amount of debt being sold to finance data centers and AI-related investments and wants additional layers of credit protection before considering a purchase.

There’s opportunity abroad, he said, including in emerging markets where the fund has a 10% weighting. He likes Brazilian local-currency debt.

Ivascyn thinks the dollar looks “rich” against other major currencies—the greenback is near a high for the year. He sees steady dollar depreciation ahead.

When the Pimco manager meets with clients and investor groups, their No. 1 question is about the federal deficit, which is close to $2 trillion annually or 6% of GDP in a healthy economy.

His answer: Diversify globally. The fund’s assets, however, are dominated by U.S. dollar-denominated bonds.

The weak bond market this year has hurt returns of Ivascyn’s fund and those of other fixed-income managers, but he—like his colleagues—are more excited about the outlook than they have been in years.

The key to bond investing is starting yields. Looking head to the not-so-distance future, he sees nice returns and ample opportunity for bond investors.

Write to Andrew Bary at andrew.bary@barrons.com

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