PIMCO Monthly Income is a global fixed income investment that we follow very closely. It has no exposure to the stock market – making it a solid investment to add a component of safety and consistency to portfolios.
PIMCO pays a monthly stream of income (approximately 5.65% annually as of July 31st, 2025), but for accounting purposes, the amount of interest received monthly is added back onto the book value on investment statements.
Let’s say an investor invests $100,000 into PIMCO Monthly Income and receives a $450 interest payment the first month. PIMCO then increases the book value (the cost) of the investment on statements to $100,450 up from the $100,000 that was initially invested. This continues with every interest payment. As a result, this makes PIMCO’s performance (on investment statements) look worse than it is. Why do they do that? In part, it is a tax saving tool. By increasing the cost of the investment, with every interest payment, it reduces the relative gain when the investment is eventually sold in non-registered portfolios. The smaller the capital gain, the less tax an investor pays. Sometimes this small accounting negative overshadows the many positives.
So far in 2025, PIMCO Monthly Income has returned 5.49%, a great fixed income return over seven months. This investment has been a strong performer, helping stabilize portfolios amidst volatile equity returns earlier this year.
PIMCO Monthly Income continues to hold a sizeable weighting in US fixed income, and is well positioned to take advantage of pending US Federal Reserve interest rate cuts. Here is how…
Currently, the Bank of Canada interest rate is 2.75%, whereas the US Federal Reserve interest rate is 4.25% to 4.50%, making it more attractive to hold US fixed-income investments. When interest rates fall… bond values increase. US bond yields currently provide greater income, coupled with higher potential for growth – as US interest rates decrease, which is expected in the Fall of 2025.
PIMCO Monthly Income is also hedged to the Canadian dollar, meaning any potential decreases, or increases in foreign currency values do not affect the underlying return in Canadian dollars. This is a great way for Canadians to receive US fixed income yields, without exposing themselves to currency risk, if the US dollar declines compared to our Loonie.
Over the long-term, stock market investments (equities) outperform fixed-income. For those approaching retirement, or in retirement, fixed-income becomes more important. Fixed-income investments are far less likely, than stock market investments, to see a large pullback and can ‘buy’ investors time, while paying consistent income as we await a stock market recovery – when one occurs.
In times of market volatility, like we’ve seen during the US tariff talk this year, PIMCO Monthly Income has done a great job weathering the storm.
We like PIMCO Monthly Income even though they might be the only investment on your statement that looks negative.
- Nathan Dyck
