Pimco Sees US Mortgage Bond Purchases Boosting Returns

Group 1 - The US government's initiative to purchase $200 billion in mortgage bonds aims to make 30-year fixed-rate home loans more affordable, which is expected to lower rates and reduce spreads on mortgage-backed securities [2][3] - Pacific Investment Management Company (Pimco) views this announcement as a positive factor for their overweight position in mortgage-backed securities, which they plan to maintain through 2025 [1][2] - The Bloomberg MBS index experienced a significant increase of 0.53%, marking its best one-day performance since August [2] Group 2 - Despite the positive short-term effects, Pimco's Chief Investment Officer Daniel Ivascyn emphasized that the long-term issue remains a shortage of homes relative to the number of households, necessitating an increase in housing stock [3] - The US 10-year yield has remained above 4% for the past year, complicating efforts to reduce loan costs, as highlighted by Treasury Secretary Scott Bessent [4] - Mortgage securities have been relatively inexpensive compared to corporate and Treasury bonds since the Federal Reserve began selling its mortgage holdings in 2022, leading to a strong performance in the Bloomberg index, which gained 8.6% last year, the best since 2002 [6]