- The U.S and global credit markets are experiencing accelerating tightening as the economy slows and inflation data continues to be "worse than expected."
- PIMCO Dynamic Credit Fund, PDI, has excessive risk exposure due to its heavy allocation to non-agency mortgages and non-investment grade corporate debt.
- While PDI has an attractive 11-12% yield, inflation, taxes, NAV premiums, rising borrowing costs, and default risks may erase most gains.
- Borrowing money to buy debt in highly indebted companies can hardly be considered "investing" and is more likely "speculation." That will likely eventually end in significant permanent losses.
- Unlike in 2020, it is doubtful PDI will have a rapid rebound since the Federal Reserve has no means of bailing out the financial system and may need to tighten much further.
For further details see:
PDI: As Credit Markets Tumble, Losses May Be Permanent