Pimco says ‘credit loss cycle’ has started, favors investment grade bonds
BloombergLast updated: June 11, 2026 at 07:17:00 IST
Synopsis
Pacific Investment Management Co. warns that a cycle of credit losses is looming, driven by large AI spending that could widen economic disparities and impact lower-quality borrowers. The company anticipates a resurgence in defaults and significantly higher losses in direct leveraged and private loans, citing borrower strategies such as maturity extensions and in-kind payment structures.
ETMarkets.comPacific Investment Management Co. warns that the “credit loss cycle is upon us” as heavy spending on artificial intelligence could broaden economic outcomes and have negative consequences. lower quality borrowers. PimcoRichard Clarida, Andrew Balls and Daniel Ivascyn stated in the company’s latest annual secular outlook report that “the default cycle is reasserting itself, and we expect significantly higher losses on lower quality credit, such as direct leveraged and private loans.
Pimco, which manages $2.3 trillion in assets, said the development of AI could broaden the range of economic outcomes over the next five years while putting weaker and more indebted borrowers at greater risk. High quality credit spreads – the extra yield that investors demand from U.S. Treasuries to hold highly rated corporate debt – remains near three-decade lows. Demand for riskier debt securities has also held up despite a recent global bond sell-offas higher yields attract buyers. Pimco said the backdrop faces “high secular uncertainty” and “we interpret this as complacency rather than strength.”
The company also highlighted “increased instances of maturity extensions and in-kind payment structures that allow borrowers to repay their debt with more debt.”
(What’s moving Sensex And Clever Track latest market news, stock market advice, Budget 2025, Equity market on the 2025 budget And expert adviceon AND Markets. Additionally, ETMarkets.com is now on Telegram. For the fastest news alerts on financial markets, investment strategies and stock market alerts, subscribe to our Telegram feeds .)
Subscribe to AND Bonus and read it Electronic document on economic times Online.and Sensex today.
Most trending stocks: SBI share price, Axis Bank share price, HDFC Bank share price, Infosys share price, Wipro stock price, NTPC stock price
…moreless
(You can now subscribe to our ETMarkets WhatsApp Channel)
(What’s moving Sensex And Clever Track latest market news, stock market advice, Budget 2025, Equity market on the 2025 budget And expert adviceon AND Markets. Additionally, ETMarkets.com is now on Telegram. For the fastest news alerts on financial markets, investment strategies and stock market alerts, subscribe to our Telegram feeds .)
Subscribe to AND Bonus and read it Electronic document on economic times Online.and Sensex today.
Most trending stocks: SBI share price, Axis Bank share price, HDFC Bank share price, Infosys share price, Wipro stock price, NTPC stock price
…moreless
