Investment News - Market

Outlook & Positioning for the Income Fund as of April 2026

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In this article, we as PIMCO summarize our positioning and outlook for the Income Fund as of April 2026.

Contributors:

• Exposure to the cash interest rate in the US, from carry
• Exposure to US Agency Mortgage-Backed Securities, as spreads tightened and from carry
• Long exposure to Investment Grade and High Yield Corporate Credit, as spreads tightened
• Long exposure to select Emerging Markets FX, primarily in LatAm, as they appreciated against the US Dollar and from carry

Detractor:

• Long exposure to US duration, as yields rose across the curve
• Long exposure to UK duration, as yields rose across the curve

Positioning and Outlook:

• Strategic Liquidity – The Fund continues to focus on maintaining high levels of liquidity (cash, Treasuries and Agency MBS) to provide 
  additional flexibility and potentially deploy capital opportunistically.
  
  
• Interest Rate Strategies – The Fund has remained tactical on duration exposure in recent months, with a preference for US rates. The 
  exposure focuses on the front and intermediate segments of the yield curve where we see the most attractive opportunities. We maintain a long 
  exposure to US TIPS to protect the portfolio against elevated inflation risks. Elsewhere, the Fund maintains a modest long position in UK 
  duration and Australian duration.
  
  
• Mortgage-Backed Exposures – We continue to like non-Agency mortgage-backed securities due to their attractive yields and risk profile. Our 
  exposure is mainly in senior tranches of legacy, well seasoned deals, with very solid underlying fundamentals that should be resilient even in 
  very distressed house price scenarios. We also continue to hold select higher coupon Agency MBS and senior AAA-rated tranches of CMBS 
  indices. Both sectors provide "safe spread" along with an attractive risk profile in the event of a flight to quality. We remain focused on 
  maintaining flexibility and ensuring a high level of liquidity in the portfolio.
  
  
• Corporates – Within investment grade corporates we continue to like systemically important banks with strong capital positions and direct 
  support from central banks, with a focus on the most senior parts of banks’ capital structures. Outside of financials, sector exposure is a 
  function of bottom-up credit selection rather than any specific sector views. The Fund is highly selective in cash High Yield bonds, with a focus 
  on short dated senior and secured bonds, as well as select hung loans and restructuring opportunities. The Fund continues to maintain an 
  allocation to high yield CDX, which benefit from superior liquidity versus cash bonds.
  
  
• Emerging Markets – Exposure to emerging markets remains modest. We still believe that EM assets can be a good source of carry and 
  diversification, but we keep individual country exposures small. We are focused on select regions which provide higher yields and what we 
  perceive is limited potential for long-term financial loss. We are generally focused on sovereigns and quasi-sovereigns, specifically on 
  organizations that have close government ties.
  
  
• Currency – We remain tactical in our currency positioning, holding a long exposure to a basket of higher carry EM currencies with short 
  positions in select low carry EM currencies. We also have long exposure to a number of DM currencies we believe are attractively valued while 
  maintaining short positions in other DM currencies where macro momentum is sluggish.

Haftungsausschlusserklärung (Disclaimer) All investments contain risk and may lose value. This material is intended for informational purposes only. Forecasts, estimates and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of America L.P. in the United States and throughout the world. THE NEW NEUTRAL is a trademark of Pacific Investment Management Company LCC in the United States and throughout the world. ©2022, PIMCO