Pimco

Wary of America's swelling federal budget gap and debt burden, the money manager is part of a wave of investment firms steering away from the longest-dated U.S. government bonds.

The strategy, which focuses on non-bank lending to sectors such as residential mortgages, credit cards and auto loans, has been a key plank of the bond giant's push into private lending.

As an investment, cat bonds have drawn attention in recent years after far exceeding returns on other high-risk fixed-income markets.

Stickier inflation and deteriorating budget estimates "could start to reverse the 40-year downtrend" of a key measure of how much bond investors are compensated for holding long-term debt.

Focused on the next six to 12 months, Pimco looks for the bond market's recent gains to be sustained but not extended in a way that would warrant increasing exposure to interest rates.

Asset managers said in interviews last week that they're comfortable buying Treasuries and other high-quality bonds at levels they finally see as attractive.

Ivascyn finds himself at a critical juncture. Pimco Income Fund, the world's largest actively managed bond fund, has started to trail its very top-performing peers.

PIMCO is resecuritizing a large swathe of mostly non-qualified home loans that were previously bundled in 2016-2017 mortgage-backed securities, according to presale reports.

The holdings demonstrate “resiliency over several credit cycles, with low realized principal losses and robust returns for CLO equity,” managers say.