Pimco Says Long-Term Treasuries Are Attractive, Would Buy More if Yields Rise

Pimco, the global bond manager, said current long-term Treasury yields offer an attractive buying opportunity and that it would add to positions if yields rise further.

Mark Seidner, Pimco’s chief investment officer for non-traditional strategies, and Pramol Dhawan, head of emerging markets portfolio management, wrote in a report on Aug. 24 that bonds remain attractive and that the firm would increase exposure if yields keep rising. Higher yields offer income, carry and roll-down opportunities from a steeper yield curve, they wrote.

Yields on 30-year Treasuries have climbed to around their highest level in two decades. Long-term yields have risen faster than short-term rates, steepening the yield curve and lifting the term premium. Pimco also pointed to higher long-term yields in Europe, the U.K. and Japan.

Pimco expects the term premium to remain elevated for some time unless an unexpected recession hits. It also said concerns over expanded fiscal stimulus and increased government bond supply are key risks that could push yields higher.

Seidner and Dhawan wrote that current yields look unusually high mainly because they are being compared with rates that were artificially suppressed after the global financial crisis. By historical standards, current yield levels are becoming increasingly attractive and offer a favorable entry point for long-term investors, they added.

Separately, U.S. Treasury Secretary Scott Bessent rattled markets last week by unexpectedly expanding the size of long-term Treasury buybacks. The move came after U.S. national debt topped $40 trillion, though yields resumed rising a day later. JPMorgan Chase & Co. and PGIM warned that borrowing costs could eventually rise if the Treasury’s debt-management strategy becomes less predictable. Billionaire investor Ray Dalio also said a U.S. debt crisis could emerge within three years and recommended reducing bond exposure.