PDO - PTY CEF: 2023 Replay

2024-05-07 11:33:23 ET

Summary

• PIMCO Corporate and Income Opportunity Fund currently yields around 10%, but risks should be considered when evaluating the attractiveness of the yield.
• The PTY closed-end fund has exposure to high-yield instruments and mortgage-related assets, which pose risks in the current market conditions.
• The 10% dividends may not be enough to compensate for the risks given the current yield spread, which represents a very similar setup as the fund faced in September 2023.

PTY CEF yields ~10%

I’ve written two articles on the PIMCO Corporate and Income Opportunity Fund (NYSE: PTY ) in 2023 as seen in the chart below. In both articles, I cautioned potential investors about the risks lurking behind the closed-end fund's ("CEF") generous yield. Quote:

PTY’s yielding ~10% currently, and dividends are paid monthly - a quite appealing combination. However, potential investors should be aware of the risks lurking behind the yield. The yield is not that attractive when properly benchmarked. Macroscopic risks such as high interest rates and credit risks are likely to cause price depreciation at the same time.

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