The U.S. administration is moving towards cutting interest rates ahead of the 2026 election to lower borrowing costs. Treasury Secretary Scott Bessent is pivotal in this strategy, focusing on issuing debt at short-term rates and using those funds to buy longer-term Treasuries, thereby reducing their supply and capping yields.
One noteworthy investment opportunity is the PIMCO Corporate & Income Opportunity Fund (PTY), a closed-end fund with an effective bond maturity of over seven years. As of now, PTY is trading at a premium of 9.6% to its net asset value while offering an 11% dividend yield. Its diversified portfolio includes 39% U.S. high-yield debt and 13% emerging markets, positioning it to potentially benefit from falling rates.
Despite a slight dividend reduction during COVID-19, PTY’s payout remains stable, aided by regular special dividends. Given the current market conditions and expectations of declining rates, the fund’s steady returns and substantial monthly payments present a compelling investment option.
