BOND in 5

Text on screen: PIMCO

Text on screen: PIMCO provides services to qualified institutions and investors. This is not an offer to any person in any jurisdiction where unlawful or unauthorized.

Text on screen: Adam Browne, Head of ETF Sales

BROWNE: Actively managed ETFs have taken the predominant share of new money from investors in the Morningstar core plus bond category over the last several quarters, reflecting a growing awareness of the limitations of traditional passive fixed income indices.

PIMCO’s active bond ETF, ticker symbol B-O-N-D, has exemplified this opportunity. Notably, BOND has withstood a wide range of macroeconomic conditions since its inception in 2012.

Text on screen: BOND in 5 with David Braun & Adam Browne.

In this video, my colleague and Portfolio Manager David Braun, will share his insights on how he is positioning BOND in today’s markets to pursue outperformance while managing risk effectively.

Text on screen: Market backdrop

Text on screen: David Braun, Portfolio Manager

BRAUN: Today's macro backdrop where policy uncertainty is elevated really highlights the need for stability and resiliency in your investments. Ongoing uncertainty may persist, likely resulting in not just volatile markets, but also in slowing economic growth and the rising risk of recession.

Images on screen: PIMCO trade floor

In such a volatile environment, we believe it's necessary to take an active approach to your asset allocation and overall portfolio construction.

FULL PAGE GRAPHIC –CHART TITLE: Yield vs. 5-year forward return.

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The line chart shows bond yields, measured by the Bloomberg U.S. Aggregate Bond Index yield in the blue line, and forward 5-year returns, measured by the Bloomberg U.S. Aggregate Bond Index forward 5-year return in the green line, from 1976 to 2024. The Average yield since 2010 is 2.8%. Since late 2020, the yield (blue line) has risen significantly from around 1.1% to 4.5% as of April 30, 2025. The 5-year forward returns have closely tracked bond yields from 1976 to around 2020. The chart suggests that the 5-year forward may follow the same historical pattern. Additionally, the chart shows that for the period covered, the index’s bond yield had a 94% correlation with 5-year forward returns.

We believe that high quality fixed income is attractive because of its high starting yield, which is some of the highest we've seen in the past 20 years.

FULL PAGE GRAPHIC – CHART TITLE: Performance during recent periods of market stress.

The bar chart shows the performance of the S&P 500 Index in blue and the Bloomberg US Aggregate Bond Index in green across periods of market stress: During the Silicon Valley Bank Collapse in March 2023, the S&P 500 returned -1.5%, and the Bloomberg US Aggregate returned positive 3.4%; during the Japan Carry Unwind in August 2024, the S&P 500 returned -2.1%, and the Bloomberg US Aggregate returned positive 2.2%; and amid the Trade Wars and Growth Concerns, the S&P 500 returned -6.8%, and the Bloomberg US Aggregate returned positive 3.2%.

And importantly, the diversification benefit of high quality fixed income versus risk assets like equities. This should help investors navigate what is likely to be a turbulent and volatile period ahead.

Text on screen: BOND ETF

B-O-N-D or Bond is a strategy we've been running at PIMCO for over a decade now.

Text on screen: Bond is an actively-managed ETF focusing on primarily high quality core fixed income investments

Bond is an actively managed ETF focusing on high quality core fixed income investments. In bond, we have the ability to invest in index eligible securities like treasuries, agency mortgages, and investment grade corporate credit.

FULL PAGE GRAPHIC – CHART TITLE:  Positioning: BOND vs. Benchmark

There are two pie charts that break down the sectors that comprise PIMCO BOND ETF Portfolio Breakdown vs. its benchmark, Bloomberg US Aggregate Bond Index. Starting at the left with PIMCO BOND ETF the sectors are as follows: Agency MBS 41%; IG Credit 22%; Government-related 13%; ABS 8%;  Non-agency MBS 6%; CMBS 3%; Emerging Markets 1%; Cash 1%; Other 4%; High Yield 2%. The pie chart at right, shows the sector breakdown of Bloomberg US Aggregate Bond Index as follows: Government-related 48%; Agency MBS 25%; IG Credit 24%; CMBS 1%; Emerging Markets 1%; other 1%.

Yet at the same time, we can go outside the index and incorporate our high conviction ideas in the bond market, such as emerging markets and securitized product and developed market sovereign bonds outside of the United States.

We build the portfolio truly on a Bond by Bond fashion. Importantly, during that construction phase as well as the ongoing monitoring trading of the portfolio, we focus on multiple market outcomes, which is critical in today's uncertain environment. 

Text on screen: How BOND is positioned today

Text on screen: TITLE – Three themes in BOND:, BULLETS – Active interest rate management, Bottom up focus across asset classes, Dry powder

We're focusing on three themes in running bond today. First, active interest rate management. We continue to believe that forward-looking rate environment will be one that presents opportunities to dynamically add or reduce overall portfolio duration. Moreover, given the potential for global monetary policy divergence, as some central banks react more aggressively to their local economy, there will likely be opportunities to generate additional returns by introducing global bonds outside of the United States.

Second, bottom up focus across asset classes. As an active manager, we're constantly evaluating companies as well as other spread oriented asset classes such as securitized products. We continue to find securitized products like non-agency mortgages or triple A rated structure product backed by other assets to look attractive on a valuation and resiliency perspective.

Agency mortgages. We continue to be overweight agency mortgages given their attractive spread. Agency mortgages have also historically been liquid, which provides future flexibility in a portfolio.

And on corporate credit, valuations continue to be tight, especially given today's backdrop of slowing growth and rising recession risk. However, that doesn't mean we aren't finding attractive bottom up ideas. For example, we're focusing on lending to financial firms in the senior part of the capital structure. These firms have clean balance sheets and a potential to outperform, especially if deregulation becomes a priority out of the current administration of Washington.

And third, dry powder. We're focusing on retaining dry powder or ensuring exposures in our portfolios are resilient. We've been living in a more volatile market environment and providing liquidity to a market that overshoots can be a beneficial strategy.

Text on screen:  Being able to respond and react is a key advantage

Images on screen: PIMCO trade floor

Market dislocations occur for a variety of reasons and being able to respond and execute is a key advantage for an active investor.

Text on screen: How our clients are using BOND

BROWNE: We are seeing investors using BOND to play 3 potential roles:

Text on screen: Return driver

First as a return driver: In today’s environment, investors can pursue high absolute returns without having to assume additional credit, liquidity, or complexity risk.

Text on screen: Capital preservation vehicle

Second, as a capital preservation vehicle: With high-quality core fixed income yields sitting near historic highs, there’s plenty of room for rates to fall and price to rise.

Text on screen: Diversifier

And third as a diversifier: High-quality core bonds can serve as effective diversifier in multi-asset portfolios, especially when equity markets experience downturns. They help balance risk and provide stability when it’s needed most.

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Disclosure

Information is as of 23 April 2025, unless otherwise stated.

References to liquidity refer to normal market conditions.

Investors should consider the investment objectives, risks, charges and expenses of the funds carefully before investing.  This and other information are contained in the Fund’s prospectus, which may be obtained by contacting your PIMCO representative.  Please read the prospectus carefully before you invest.

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A word about risk: Investing in the bond market is subject to certain risks including the risk that fixed income securities will decline in value because of changes in interest rates; the risk that fund shares could trade at prices other than the net asset value; and the risk that the manager's investment decisions might not produce the desired results. 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 their value may fluctuate in response to the market’s perception of issuer creditworthiness; while generally supported by some form of government or private guarantee there is no assurance that private guarantors will meet their obligations. High-yield, lower-rated, securities involve greater risk than higher-rated securities; portfolios that invest in them may be subject to greater levels of credit and liquidity risk than portfolios that do not. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. Management risk is the risk that the investment techniques and risk analyses applied by an investment manager will not produce the desired results, and that certain policies or developments may affect the investment techniques available to the manager in connection with managing the strategy. Diversification does not ensure against loss.

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.

Correlation is a statistical measure of how two securities move in relation to each other. The correlation of various indexes or securities against one another or against inflation is based upon data over a certain time period. These correlations may vary substantially in the future or over different time periods that can result in greater volatility. The credit quality of a particular security or group of securities does not ensure the stability or safety of an overall portfolio. The quality ratings of individual issues/issuers are provided to indicate the credit-worthiness of such issues/issuer and generally range from AAA, Aaa, or AAA (highest) to D, C, or D (lowest) for S&P, Moody’s, and Fitch respectively.

Bloomberg U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis. S&P 500 Index is an unmanaged market index generally considered representative of the stock market as a whole. The Index focuses on the large-cap segment of the U.S. equities market. 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 opinions of the manager 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. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. 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. ©2025, PIMCO.

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