Advisor Playbook Update
Text on screen: PIMCO / Advisor Forum
Text on screen: Brian Kyle, SENIOR VICE PRESIDENT, U.S. GWM ADVISOR SOLUTIONS
Text on screen: PIMCO provides services only to qualified institutions and investors. This is not an offer to any person in any jurisdiction where unlawful or unauthorized.
Kyle: I thought an advisor described it well when they said 2025 has been an interesting decade for investors and for many of us it has felt like a little bit longer than a half a year, particularly given the superlatives that 2025 has brought us, a sharp selloff, the fastest recovery from a 15% draw down to new all-time highs, the worst performance for the US dollar for the first six months of the year since the 1970s.
And despite all that, one thing has remained consistent and that is global yields are not only elevated but in our view are attractive today. Over the next five or so minutes, we're going to explore three themes that many advisors are focused on with their clients using PIMCO's Advisor Playbook. First, how flexibility can help investors seeking income. Second, opportunities to diversify internationally. And third, opportunities for tax efficient income in muni land.
FULL PAGE GRAPHIC – TITLE: Yields Across Most Fixed Income Sectors Are High vs. Recent History
Text on screen: TITLE – Yields Across Most Fixed Income Sectors Are High vs. Recent History; SUBTITLE – Today, yields are at a much stronger starting point compared to Q4 2021.
Image on screen: A bar chart shows yields as of 30 June 2025 versus those from 31 December 2021 for 10 fixed-income classes. All of the asset classes show much higher yields three and a half years later. The four pairs of bars are in shades of blue – solid for 2025, and lighter in color for 2021. Yield for agency mortgage-backed securities is 5.1% June 2025, up from 1.7% year-end 2021. Securitized credit is at 4.7% in June 2025, up from 1.9% in 2021, U.S. core is at 4.5%, up from 1.7%, and global core is at 5%, up from 0.7%. The next two classes are shown with bars in shades of green: Yields for investment grade credit are at 4.9% in 2025, up from 2.3% in 2021; and high-yield credit at 6.9%, up from 4.1%. Next, in shades of purple, bars show yield for emerging markets at 7.3% in 2025, up from 5.1% in 2021. Among municipals, with bars in shades of light blue, investment grade yields were at 6.7% in 2025, up from 1.8% in 2021, while high-yield munis were at 9.8%, up from 4.6% in 2021. Last, on the far right, with bars in shades of pink, private credit yields were 10.3% in 2025, up from 8.1% in 2021.
So first, flexibility. This chart may look familiar, but we love it because it really sets the stage for the opportunity set for fixed income globally. And what you likely notice first is yields are elevated relative to history. But what you also may notice is if you look beyond core bonds in the US, there's a lot of attractive opportunities to inject yield on the behalf of clients.
Things like international bonds, emerging markets, we'll talk about munis and even opportunities across private assets. Taking it a layer deeper, if you focus in on securitized credit as an example, that seems like a standard asset class, one layer deeper, that is a $15 trillion opportunity set. It includes things like residential and commercial mortgage backed securities, CLOs, ABS.
If you have the know-how the data, the personnel and the technology to uncover opportunities within that opportunity set, you can really source attractive risk adjusted yields to complement those core positions. So that is exactly what PIMCO seeks to do in many of our multi-sector strategies who have the flexibility again to go out and identify those opportunities.
Finally, if you have the scale and the resources, you can make the determination, do I want to own the public version of that security or could it make more sense for a client based off their suitability and risk tolerance, liquidity needs, et cetera, to own the whole loan itself. And those are also opportunities, PIMCO partners directly with advisors to help think through on behalf of their clients. So, at the end of the day, flexibility and seeking income has been rewarded thus far through 2025.
Second, international diversification. If I were to ask you, what percent would you guess the global fixed income opportunity set comes from the United States? I often hear 60, maybe 70%. And that's a reasonable guess because in the equity space, market cap from the US does make up, you know, roughly 60 plus percent of the global market cap.
FULL PAGE GRAPHIC – TITLE: Going Global: Expanding into a Global Opportunity Set May Improve Diversification and Return Potential
Text on screen: TITLE – Going Global: Expanding into a Global Opportunity Set May Improve Diversification and Return Potential; SUBTITLE – Over 60% of the global bond market is outside the U.S.
Image on screen: A pie chart shows the asset allocation of the global bond market. The U.S. portion of the pie, shown in dark blue, is the largest share, with a market size of $57 trillion, representing 38% of the total share of the global bond market. Next, in light blue, is emerging markets, with assets of $43 trillion, representing 28% of the world market. Next, in burgundy, is developed markets ex-U.S. and ex-Eurozone, at $27 trillion, or 18%. Share represented by the Eurozone, shaded in olive, is at $25 trillion, or 16%.
Text on screen: TITLE – Going Global: Expanding into a Global Opportunity Set May Improve Diversification and Return Potential; SUBTITLE – Annual Returns for Key Global Markets
Image on screen: A table shows the annual bond returns for eight key markets worldwide for the last 10 years. Each column represents a year, running from 2016 to 2025, with asset classes ranked each year from top to bottom in terms of performance. In 2025, emerging markets local, in green, has a best return, at 12.26%. Next is emerging markets external, in gray-blue, at 5.48%, followed by Australia, in light green, at 4.09%. The rest of the classes are as follows: U.S, in blue, at 4.02%, Canada, in burgundy, at 2.71%; Eurozone, in olive, at 1.96%; U.K., in purple, at 1.93%; and Japan, in light blue, at negative 0.06%. Also noteworthy: Emerging markets also topped the rankings in 2023, at 12.73%, and 2017, at 15.21%. Also, in 2021 and 2022, negative returns were across the board: in 2022, Japan fared the best with a negative 3.23% return, that of the U.S. at negative 13.01%, with Canada the worst at negative 21.86%. The year before, 2021, was not as severe, with Japan eking out a 0.23% gain, while all of the other classes lost ground, with emerging markets faring the worst, at negative 8.75%.
Within bonds, the US only comprises 38% of the market. So if you're an investor solely focused in the US, you're leaving more than 60% of the opportunity set off the table.
By focusing on these different geographies that maybe are at different stages of their interest rate cycle, different yield levels, growth and inflation dynamics, you can complement again that US exposure and add some high-quality yield alongside it. It's not just a diversification story though, as you can see on this table, in not one of the last 10 calendar years has the US been the top performing geography.
So yes, allocating internationally can help diversify fixed income exposures, but it also can be a great way to add yield and return potential. We have a lot of resources at your disposal to help think through currency risk as well. A topic that's come up a lot. So please connect with your account manager or some of our tools such as PIMCO Pro if you're interested in understanding the impacts of currency risk on client portfolios.
FULL PAGE GRAPHIC – TITLE: Attractive municipal bond yields signal opportunity
Text on screen: TITLE – Attractive municipal bond yields signal opportunity
Image on screen: A line graph charts the yield to worst for investment grade and high-yield municipals from June 2005 to June 2025. Both metrics tend to move in the same direction over time, with yields for high yield munis – in blue – above those of investment grade, in green. In 2025, yield to worst for high-yield is at 5.81%, compared with 3.96% for investment grade. The chart notes how elevated yields after big outflows results in attractive returns going forward for patient investors. To illustrate the point, the chart marks four points on the graph where monthly outflows were negative $12 billion. The first episode, in the spring of 2009, high-yield munis had about an 11% yield, while those of investment grade were around 4.2%. Rates fell after that, and the subsequent one-year return for high-yield munis was 33%, while that of investment grade was 13%. The next point, in the summer of 2013, high-yield munis were at about 7% and investment grade around 3.8%, the subsequent one-year returns were 11% for high yield and 8% for investment grade. The next point, in early 2020, high-yield munis had recently spiked, to roughly 6%. investment grade to 2.5%, but the subsequent one-year returns were 15% for high yield and 6% for investment grade. In the final notation on the chart, in the summer of 2023, when yields for munis were at about 6.5% and investment grade around 3.8%, the subsequent one-year returns were 17% for high yield and 10% for investment grade.
Finally, tax efficient income is of paramount concern, especially for ultra-high net worth clients. Within the muni markets, we've seen yields tick up over the course of this year. And what you end up seeing on this chart is historically as yields sell off, the forward return for investors who lock in those yields is pretty attractive as evidenced by that subsequent one-year return. Unfortunately, muni investors tend to do the opposite.
If you look at the flows during each one of those periods, there are net outflows to the tune of about twelve and a half billion dollars monthly. So as advisors, we know many of you are working hand in hand with clients to help them understand, as you see elevated yields within munis, particularly when they're driven by a confluence of factors like technical risk, headline risk, and ultimately the fundamentals we believe are intact.
Locking in that yield is really in their best interest. So not only identifying the opportunity but figuring out how to access it is one of the ways in which the Playbook and the resource that PIMCO can help you as an advisor. Namely figuring out, what's the appropriate vehicle across managed accounts, ETFs, mutual funds or even does it make sense to give up a little bit of liquidity and look at vehicles in the semi liquid space such as interval funds. If you found these charts helpful, please download the full Investor guide or download the full Advisor Playbook that includes over a hundred pages of content designed for you as an advisor. Finally, don't hesitate to reach out to your PIMCO account manager or to me and our team directly.
Text on screen: For more insights and information visit pimco.com
Text on screen: PIMCO / Advisor Forum
Disclosure
Past performance is not a guarantee or a reliable indicator of future results.
All investments contain risk and may lose value. Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and low interest rate environments increase this risk. Reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Investing in foreign-denominated and/or -domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. Mortgage- and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and while generally supported by a government, government-agency or private guarantor, there is no assurance that the guarantor will meet its obligations. Income from municipal bonds is exempt from federal income tax and may be subject to state and local taxes and at times the alternative minimum tax; a strategy concentrating in a single or limited number of states is subject to greater risk of adverse economic conditions and regulatory changes.
Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Outlook and strategies are subject to change without notice.
It is not possible to invest directly in an unmanaged index.
PIMCO as a general matter provides services to qualified institutions, financial intermediaries and institutional investors. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the current opinions of the author but not necessarily those of PIMCO and such opinions are subject to change without notice. This material has been distributed for informational purposes only 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 LLC in the United States and throughout the world. Pacific Investment Management Company LLC, 650 Newport Center Drive, Newport Beach, CA 92660, 800-387-4626. ©2025, PIMCO
CMR2025-0710-4653303