TD - PIMCO's 14% Yield PDI: Hold For Income Only

2024-04-27 08:32:29 ET

Summary

• The last time I covered PIMCO's Dynamic Income Fund I called it a buy because of the potential for high income, and capital gains brought on by interest rate cuts.
• The high income is likely to continue being paid, but the rate cuts appear less likely to materialize. Capital gains are looking less likely.
• The problem is that inflation has ticked up and so the likelihood of the Federal Reserve doing interest rate cuts has decreased.
• In this article I explain why I'm downgrading my PDI rating to hold.

When I last covered the PIMCO Dynamic Income Fund ( PDI ), I rated the 14% yielding ETF a buy, on the grounds that it paid lots of income and stood to benefit from coming rate cuts . The high yield is still on offer, but the prospect of capital gains brought on by rate cuts is rapidly diminishing. At its last meeting, the Federal Reserve held its policy rate steady at 5.5%. At the start of the year, investors expected interest rate cuts to start early and continue until the end of the year. Now, many investors think there will be no cuts until September –if at all this year....

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