In a new video update, Dan Ivascyn, Group CIO at PIMCO, shares the firm’s latest views from the Investment Committee. He talks about what is driving strong bond market returns in 2025. He also gives insights into the outlook for fixed income and evaluates risks and opportunities in private credit. Lastly, he compares current equity valuations with those in the bond market.
2025 bond market returns and the outlook for fixed income
Dan Ivascyn describes 2025 as “an exciting year from a performance perspective,” noting that a wide range of fixed income markets have contributed to returns while helping maintain liquidity and flexibility. He emphasises that “the attractive starting yield has been the driver of those returns,” supported by relative-value opportunities across global yield curves.
At the front end of the curve, he explains, shorter maturities have outperformed longer ones, while markets such as the United Kingdom, Japan and Australia have offered “very attractive yields when you hedge back to the US dollar.” These exposures, he says, have offered both diversification and volatility reduction while delivering strong returns.
Ivascyn also highlights a modestly weaker US dollar as another positive driver. “A very small dollar underweight, expressing relative value views across some of the more liquid, higher quality currencies across the globe, have provided some incremental return,” he notes. He adds that credit sectors have been “quite target rich,” with both high yield and higher-quality credit generating attractive results.
Overall, he says, “we’re excited about the year” and, importantly, about future prospects. With yields still elevated and global cycles diverging, he believes active management is well positioned to continue outperforming passive alternatives.
On private credit
Addressing concerns about private credit, Ivascyn argues that the key issue is not the public–private distinction but the liquidity and economic sensitivity of the credit in question. “Am I getting paid to take less liquidity?” he asks, adding that lower-quality, more economically sensitive credit must offer greater compensation.
He points out that after years of strong credit performance, spreads are tight and several economically sensitive segments—“bank loans… or private credit, with mid-market direct lending as an example”—have grown rapidly. Given this expansion and some deterioration in underwriting standards, he says “it shouldn’t be a surprise that there are a few credit problems,” and that some segments “are going to disappoint investors.”
However, he views this as an opportunity for active managers: “What’s great is that as an active investor… this is very exciting.” By maintaining liquidity and focusing on more resilient forms of credit, he believes PIMCO is well positioned for a period in which economic slowdown will reveal clearer differences between stronger and weaker issuers.
Equities vs bond market valuations
Comparing valuations, Ivascyn notes that high-quality fixed income now looks compelling when assessed against equities over “multiple decades of history.” He argues that “on a forward basis bonds are expected to do quite well – absolute, relative to equities, relative to their lower anticipated volatility and relative to cash.”
As a result, he suggests investors may want to shift some exposure away from segments that have benefited from a strong run but now look stretched. He also notes “significant dispersion… across sectors from a valuation perspective” within equities, creating scope for active decisions.
His caution is grounded in starting valuations: “As an insurance policy, we think it makes sense to diversify a little bit into fixed income.” He expresses even stronger conviction regarding cash, arguing that cash rates are set to fall “to a level meaningfully below the yield you can get in an intermediate duration high quality bond portfolio.”
