PIMCO: The other side of higher yields

PIMCO: The other side of higher yields

28 oktober 2026

High Yield
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In his latest paper, PIMCO’s Lotfi Karoui, Multi-Asset Strategist, discusses the benefits of higher yields for those looking for income and the cost to those with weaker balance sheets or significant refinancing needs.

Key Takeaways:

  • Bonds’ renewed appeal comes with uneven economic costs. Higher starting yields offer income and potential downside mitigation, while exposing borrowers with weak balance sheets and significant refinancing needs.
  • Credit decompression should deepen (i.e., low quality borrowers will likely underperform the broader market). CCC rated companies, fiscally vulnerable sovereign issuers, and leveraged AI borrowers face distinct pressures from higher funding costs, with growing AI debt supply adding competition for capital.
  • Housing faces a prolonged adjustment, not necessarily a new crisis. Higher mortgage rates should extend residential housing weakness in the U.S., but despite higher real yields pressuring commercial property valuations, there hasn’t yet been a broad contraction in credit availability.

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