BIT - PHK: Management Making Smart Moves Right Now But The Valuation Is Really Steep

2024-07-31 10:02:11 ET

Summary

• PIMCO High Income Fund specializes in income-focused assets, with a 12.00% distribution yield, outperforming peers in the Fixed-Income Multi-Sector category.
• Multi-sector bond funds like PIMCO High Income Fund have maintained double-digit yields despite market pricing in interest rate declines.
• The PHK closed-end fund has underperformed domestic bonds over the past three months, which is very disappointing.
• The fund appears to have made some smart moves during the second quarter of this year, and it also appears to be decreasing its leverage.
• The fund trades at an enormous premium on net asset value, which is the only real complaint that can be made about it right now.

The PIMCO High Income Fund ( PHK ) is a closed-end fund that can be purchased by investors for whom income is a high priority. Indeed, like most PIMCO funds, the PIMCO High Income Fund specializes in investing in assets for which the provision of income is a defining characteristic. Unfortunately, over the last few weeks, we have seen the yields of most income-focused funds decline as many market participants have become very convinced that the Federal Reserve will reduce its benchmark interest rate at the meeting in mid-September. While I am not as certain about the timing of the interest rate cut, it does seem fairly clear that the private sector has been slowing down fairly significantly. This probably sets the country up for a rate cut before the end of the year. With that said, this scenario mostly depends on the economic data continuing to trend in the same direction that it currently is.

As of the time of writing, the PIMCO High Income Fund boasts a very impressive 12.00% distribution yield. This is quite a bit better than its peers, as is clearly shown here:

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