Pimco warns defaults are starting again in debt markets, lays out defensive bond playbook
Pimco, one of the world's largest bond managers, said defaults are starting to climb again across credit markets and urged investors to move toward defensive bond portfolios. The firm flagged building stress in leveraged loans and lower-rated high-yield issuance.
Pimco executives told MarketWatch that a divergence not seen for years was opening up across credit markets, with default rates on leveraged loans and CCC-rated high-yield bonds beginning to push back above their historical averages. "Time is shrinking for companies under cost pressure," one manager said.
The firm's defensive playbook calls for an overweight in high-quality investment-grade corporates, agency mortgage-backed securities and shorter-duration Treasurys. Pimco recommended trimming exposure to leveraged loans and avoiding the weakest cohorts of high-yield issuance.
The warning lands as the US-Iran peace deal rekindles risk appetite, but Pimco's analysts argued the default cycle is being driven by structural weakness on corporate balance sheets rather than by macro shocks. The Federal Reserve's policy meeting later this week is the next key calendar event for investors. Not investment advice.
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