rumi
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Posts: 40
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Post by rumi on Jan 8, 2023 12:18:43 GMT
Now that our favorite PIMCO funds paid out special end-of-year distributions, the upcoming UNII reports will likely show numbers far lower than before.Do I understand this correctly? And is this bad? I suppose it's not neccasarily bad, and things might continue as usual, given that the bonds that the fund holds can cover the monthly distributions.
Any thoughts or clarifications are welcome.
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Post by steelpony10 on Jan 8, 2023 15:56:13 GMT
rumi , My experience is since short term borrowing costs have gone up the higher the leverage amount the more likely the chances of a distribution cut. Often the resulting distributions are still higher then the ones that don’t. Check CLM. We’ve already had a couple cuts and this is true for us. Cuts usually occur in this quarter, the 1st. Also one shouldn’t chase yield after a value drop only to have the new holding do the same thing two weeks later. This is all part of CEF investing. PIMCO management is the gold standard though. It’s same old, same old, not to worry. Raises come some day in the future, years not months after the Fed moves the opposite way. All of ours now probably have 10-12% distributions based on costs going back to about 2009 which isn’t too shabby considering general inflation is 5-7% and the consensus is may be for awhile. Equities offer no cap gains and value losses and conventional bonds or dividend stock offerings just are slowing your loss of purchasing power with low slow growing yields if any. Cash and CD’s are just for quitters. Cliff diving in my opinion of course. Lol.
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Post by marpro on Jan 8, 2023 16:33:16 GMT
Now that our favorite PIMCO funds paid out special end-of-year distributions, the upcoming UNII reports will likely show numbers far lower than before.Do I understand this correctly? And is this bad? I suppose it's not neccasarily bad, and things might continue as usual, given that the bonds that the fund holds can cover the monthly distributions. Any thoughts or clarifications are welcome. Yes, the coverage ratio went down to 96%. UNII trend is also down. The reason could be that part of the investments are in the Western Europe. I wouldn't worry about it now. I expect the same distribution, and the coverage ratio will improve in the future. PCI had a coverage ratio of only 85% during the pandemic time, and yet, the distribution continued. Yet, the coverage ratio came back by the summer of 21, and its NAV also came back. People started buying PCI shares heavily, and the premium jumped to 10%. I had bought PCI (now in PDI shares) with as much as 25% discount before that. Guess what, with reinvestment at cheaper prices, my cost/sh of PDI has gone down by 15% in one year. When the cost goes down, my personal yield goes up. In fact, I am not going to worry about it ever. PIMCO guys know what they are doing because I have been going through ups and downs for several years now. It is just me, not an advice. |
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Post by Chahta on Jan 8, 2023 16:34:51 GMT
Wait for cuts to buy CEFs? Let them decline first? PTY moved up well the first week of 2023.
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Deleted
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Post by Deleted on Jan 8, 2023 16:57:39 GMT
Wait for cuts to buy CEFs? Let them decline first? PTY moved up well the first week of 2023. I bought PTY on Jan. 3rd. More into corporates than the income fund. |
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Post by Chahta on Jan 8, 2023 17:06:48 GMT
Wait for cuts to buy CEFs? Let them decline first? PTY moved up well the first week of 2023. I bought PTY on Jan. 3rd. More into corporates than the income fund. I did too, with my special distribution. It did not auto invest. |
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Post by johnsmith on Jan 9, 2023 16:13:03 GMT
Now that our favorite PIMCO funds paid out special end-of-year distributions, the upcoming UNII reports will likely show numbers far lower than before.Do I understand this correctly? And is this bad? I suppose it's not neccasarily bad, and things might continue as usual, given that the bonds that the fund holds can cover the monthly distributions. Any thoughts or clarifications are welcome.
two things: - Check NAV increases over time: If the NAV is increasing more than payout in a month, that means the CEF is earning it's distribution.
- leverage costs: Most of the newer CEFs use Repo for leverage, my understanding is that these don't cost as much as "borrowings" in the traditional sense, so with short term interest rates up, they may not lead to higher costs. - UNII: Pimco uses techniques to move money between UNII and earnings, so UNII is not always accurate. A sustained trend of UNII loss (along with falling NAV) would be a reason to be somewhat concerned (factor in interest rate rises.)
I checked the 4 CEFs I own over the weekend (PDI, PDO, PTY, PAXS) and Pimco has positioned them all for 4 years duration, mostly in Government Bonds and high quality Corporate credit. This tells me they are concerned about a recession + defaults (they have CDS too now).
I am happy with the current positioning of all the 4 CEFs and very pleased with PIMCOs work!
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rumi
Ensign
Posts: 40
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Post by rumi on Jan 11, 2023 17:05:59 GMT
johnsmith, interesting, thanks for sharing. How did you learn about PIMCO having CDS in the four CEFs you mentioned? I believe CDS are like insurance, they pay out lots of money in case of a default, which is great!
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Post by johnsmith on Jan 11, 2023 19:25:32 GMT
johnsmith , interesting, thanks for sharing. How did you learn about PIMCO having CDS in the four CEFs you mentioned? I believe CDS are like insurance, they pay out lots of money in case of a default, which is great! follow the link |
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Post by xray on Apr 23, 2023 20:38:41 GMT
Bloomberg
Bonds in Trouble as $1 Trillion Liquidity Drains: Credit Weekly
James Crombie
Sat, April 22, 2023, 4:00 PM EDT
This year’s rally in risk assets is more to do with a $1 trillion central bank liquidity injection than any improvement in the economic outlook, according to Citigroup Inc.. That massive tailwind — enough to lop 50 basis points off the investment-grade risk premium — may soon become a huge drag as policymakers get back to quashing inflation, having extinguished the banking-sector fire. “With peak liquidity past, we would not be at all surprised if markets were now to experience a sudden pressure loss,” Matt King, Citi’s global markets strategist, wrote in a note. “Keep watching the liquidity data — and buckle up.” Corporate debt markets had the best first quarter since 2019, despite proliferating concerns about the economy as central banks kept raising interest rates. Credit extended the rally in recent weeks, erasing losses caused by banks collapsing. “We now expect almost all of them to stall or go into outright reverse,” King wrote in the note published April 18, referring to central banks shifting back to a tighter policy stance after the bank-spurred turmoil subsided. “This could subtract $600 billion-$800 billion in global liquidity in coming weeks, undermining risk in the process.
The return to tighter policy may already be underway, according to King, who adds that “markets, with the partial exception of US real yields, haven’t noticed yet.” The only thing that might halt the cash exodus is another run on financial institutions, which looks highly unlikely. Junk bonds are most likely to suffer from this reversal after swiftly recouping losses caused by the recent banking crisis. Despite robust demand for the debt, aided by relatively easy financial conditions, rates ratcheting higher and major economies like the US teetering on the brink of recession — or even stagflation — don’t bode well for highly-indebted borrowers.
Average global high-yield spreads have tightened to about 485 basis points, significantly less than the 543 basis points they struck during the height of the banking crisis. That’s less than the one-year average of about 500 basis points, and much lower than where risk premiums typically balloon to during a US economic contraction. Stubbornly high inflation will force central banks to keep the tightening pressure on, which would cool demand while also boosting debt-service costs, thereby hurting the weakest companies most. An economic slowdown also means earnings will suffer, and that hasten credit downgrades, defaults and distress.
With assistance from Bruce Douglas and Kevin Kingsbury.
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Live Long and Prosper....
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Post by xray on Apr 28, 2023 17:45:58 GMT
rumi, steelpony10, marpro, Chahta, johnsmith, Reuters US debt ceiling uncertainty to weigh on bonds, stocks - PIMCO Fri, April 28, 2023, 11:00 AM EDT NEW YORK, April 28 (Reuters) - While a last-minute resolution on the U.S. debt ceiling is expected, the yields of some short-term government bonds could keep moving higher ahead of an agreement, and the uncertainty is likely to weigh on stocks too, U.S. bond giant PIMCO said. Weaker-than-expected tax collections this year have pulled forward the so-called X-date - when the government would exhaust its cash and borrowing capacity - with many now expecting the deadline could be as soon as June. The political standoff has been heating up in recent days. On Thursday, the U.S. Senate showed no sign of moving to avoid a crisis, with Republicans rejecting calls to raise the $31.4 trillion limit without conditions and Democrats dismissing the idea of talks. Bond manager PIMCO said it expected the Treasury's cash buffers to run dangerously low ahead of June 15, which is when quarterly corporate tax payments are due. "As a result, we expect the Treasury will provide additional guidance soon ... this could also pull forward the acute phase of the political volatility, which is important for markets," it said in a note authored by Libby Cantrill, head of public policy, Jerome Schneider, a portfolio manager, and Tiffany Wilding, an economist. Money markets are showing signs of anxiety around the risk of a U.S. debt default, with investors paying a premium to hold Treasury bills due ahead of the expected deadline, and yields of bills maturing between mid-June and August rising rapidly. "Should investors become increasingly concerned about the possibility of a default, we would expect these yields to move much higher, perhaps 100+ basis points higher in yield," said PIMCO, also noting how repurchase agreements to invest cash have become more attractive, as investors want to avoid X date risks.Stock markets could be impacted too. In previous debt crises, the average peak-to-trough performance of the S&P 500 in the month before a resolution has been about −6.5%, PIMCO said. (Reporting by Davide Barbuscia Editing by Christina Fincher) ---------- Live Long and Prosper....
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