Oct 6, 2026 · 17 min

Higher yields reopen the case for fixed income

Fixed Income Conversation Corner with Mike Cudzil (PIMCO) and Leslie Falconio (UBS CIO)

With inflation, Treasury supply, and housing pressures clouding the rate outlook, the guests assess where fixed-income investors can still find durable value.

3 key takeaways

1Higher starting yields have restored fixed income’s appeal after the unusually low-rate COVID period.
2Persistent inflation and a bear-steepening curve could keep rates elevated and pressure bond returns.
3The guests favor agency mortgages, investment-grade credit, short Treasuries, inflation protection, and selective AI-related debt.

Don't miss

Mike Cudzil distinguishes AI-related fixed-income opportunities from equity-style bets, emphasizing viable infrastructure credits such as data centers and chip financing.

The brief

At the PIMCO Advisor Forum in Newport Beach, Mike Cudzil and Leslie Falconio argue that higher Treasury yields have renewed fixed income’s appeal after years of unusually low rates.

The rate outlook remains unsettled: elevated mortgage costs and weak housing affordability weigh on activity, while inflation could keep the Federal Reserve cautious about easing.

Heavy Treasury issuance is competing for capital, yet UBS CIO sees room for long-term rates to decline over six months and finds opportunity in higher developed-market yields.

Cudzil treats AI-related debt as a credit-selection exercise, not an equity-style growth bet, pointing toward viable infrastructure financing while warning against weaker issuers.

The preferred positioning is defensive but not passive: agency mortgages, investment-grade corporates, intermediate maturities, short Treasuries, inflation-protected securities, and bespoke AI financing.

What was said on this episode

5 statements · 5 positive

Mike Cudzilon Fixed incomePositive1:04
Fixed-income yields are currently attractive.
“Yields are quite attractive in fixed income.”
Listen at 1:04
Mike Cudzilon High-quality fixed-income portfolioPositive1:19
High-quality fixed-income portfolios could generate 6%–8% yields.
“a high-quality fixed income portfolio that could generate yields of 6%, 7%, 8%.”
Listen at 1:19
Mike Cudzilon Fixed-income book yields and five-year forward returnsPositive1:34
Five-year forward returns have a 94% correlation with starting book yields.
“94% correlation of five-year forward returns to those book yields”
Listen at 1:34
Mike Cudzilon Fixed-income allocationPositive1:47
Investors should allocate more to fixed income than several years ago.
“whatever your allocation was to fixed income a couple years ago or three, four, five years ago, it should be higher.”
Listen at 1:47
Mike Cudzilon Fixed-income allocationPositive2:15
Portfolio investors should own somewhat more fixed income.
“you should own a little bit more fixed income than less”
Listen at 2:15

Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.