Best Bond Return Potential in 14 Years: PIMCO

One of the world’s biggest bond managers sees the best opportunity in more than a decade to invest in public-debt securities as the Federal Reserve is likely to delay rate cuts until next year.

Investors can get equity-like returns by investing in short-term publicly traded bonds, which are generating yields of 6% to 8%, Pacific Investment Management Co. executives said in a series of interviews with Bloomberg TV at the firm’s Newport Beach, California, headquarters.

“We haven’t seen this return potential in bonds in 14 years,” Mark Kiesel, PIMCO’s chief investment officer for global credit, told Bloomberg’s Jonathan Ferro. “We don’t think these yields will be here a year from now.”

Agency mortgage-backed securities, in particular, present the best opportunity and can provide steady income even if the Fed stops raising rates for the cycle, PIMCO Chief Investment Officer Dan Ivascyn said.

The “most attractive asset is agency mortgages,” Ivascyn said, noting that they’re trading at “record-wide spreads.”

Investors should steer clear of senior secured loans and private credit, Ivascyn cautioned.