PIMCO | 2026 mid-year investment outlook: Global multi-sector fixed income
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[CIBC Global Asset Management]
[PIMCO]
[2026 mid-year investment outlook: Global multi-sector fixed income]
[CIBC Diversified Fixed Income Fund]
[Featuring Prerna Gupta, Senior Vice-President and Fixed Income Strategist, PIMCO]
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Hi, I'm Prerna Gupta, a fixed income strategist with PIMCO.
Fixed income appears attractive today. Starting yields remain elevated, while valuations are attractive relative to equities. We believe locking in today's elevated bond yields may offer potential opportunity to capture attractive income and price appreciation across a wide range of economic outcomes in the years ahead.
From a multiyear evaluation standpoint, a high quality, globally diversified fixed income portfolio may be well positioned today, particularly against the backdrop of stretched equity valuations and tight credit spreads. Moreover, in a persistently uncertain environment, from geopolitics to AI-driven disruption, high-quality fixed income may benefit if the hedging role of bonds reemerges. With policy uncertainty elevated and a wide range of outcomes in play, diversification and portfolio resilience remain important in the current environment.
Bonds can serve as an anchor in investor portfolios, delivering stability and a potential hedge against elevated equity market risks.
At a high level, what we're aiming to do from a positioning perspective today is to take advantage of the full toolkit we have as active global investors, to target more liquid and higher quality areas of the market, and to construct a highly diversified portfolio of income-oriented assets.
From a duration point of view, the fund has about 5.2 years of headline duration exposure as of April 30th, and we have been emphasizing duration as a risk factor given the attractive relative value we see there versus spread sectors. We continue to emphasize US duration, with about 4.4 years of exposure, while also focusing on global diversification. We maintain selective exposure to other high-quality sovereign bond markets with compelling yields, such as the UK and Australia, as we expect somewhat divergent policy paths ahead given different local macro dynamics.
The CIBC Diversified Fixed Income Fund also holds small diversifying allocations to select emerging market countries with relatively high-quality balance sheets, such as Brazil and Peru. The portfolio has modest exposure to US Treasury Inflation-Protected Securities, or TIPS, of about 0.3 years, to help hedge the portfolio against potential upside surprises in inflation.
On a sector basis, we continue to prefer securitized assets relative to generic forms of corporate credit. Within securitized, we like agency mortgage-backed securities. They have been trading at wider spreads than investment grade corporates, which is highly unusual given that corporates tend to be more sensitive to economic fundamentals. Also, the agency MBS market offers a relatively liquid profile, which helps us remain nimble.
We favor senior structure credit assets on both residential and asset-backed collateral types. In aggregate, top cohorts of the US consumer are in a relatively good position after years of positive home price appreciation and balance sheet strengthening in the more carefully regulated markets that followed the global financial crisis.
Overall, corporate credit spreads remain quite tight, but we continue to look for opportunistic exposures in the sector, focusing on unique credit situations where we can leverage the firm's size and sourcing capabilities to find investments that look even more attractive than generic forms of corporate credit.
The fund also holds long exposure to a basket of emerging market currencies, such as the Mexican peso and Brazilian real, versus the Canadian dollar for additional diversification. We recognize currencies can be more volatile than other assets, so we scale these positions appropriately.
Regarding credit quality, more than 85% of the fund is invested in investment grade rated securities as of end of April. If there is an unanticipated shock to markets and the economy, although not our base case, we believe the CIBC Diversified Fixed Income Fund is positioned to remain resilient. It is poised to mitigate the downside and maintains the flexibility to pursue attractive opportunities in that kind of environment.
[The information contained in this material are the views of PIMCO and compiled by CIBC Global Asset Management. CIBC Global Asset Management does not undertake any obligation or responsibility to update such opinions. This video was created on 20/07/2026.
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Hedging: the offset or reduction of the risk associated with all or a portion of an existing investment or group of investments. Cross-hedging is permitted as long as there is a high degree of correlation between changes in the market value of the investment or group of investments to be hedged and the hedging instrument.
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