• Rupert Harrison, senior advisor at PIMCO, argues that the recent surge in U.S. Treasury yields has created an attractive buying opportunity for government bonds, despite the pain inflicted on existing holders.
  • The 10-year Treasury yield hit 5.31% on October 5, up from 4.44% at June-end, driven by Fed tightening and geopolitical tensions.
  • While higher yields offer more income, investors should note that bond funds have suffered significant mark-to-market losses, especially in long-duration strategies.

A Painful Repricing Creates Opportunity

U.S. Treasury yields have climbed sharply across the curve, with the 10-year note touching 5.31% on October 5, up from 4.44% at the end of June, according to official Treasury data. The move, spanning 70 to 87 basis points for maturities from 2 to 30 years, has been brutal for bondholders. Morningstar (MORN) reported that its U.S. Core Bond Index lost 3.4% in the third quarter—the worst quarterly result since Q3 2022—while long-duration Treasuries fell 8.0%.

But for Rupert Harrison, senior advisor at PIMCO, the selloff has turned government bonds into “screaming good value.” Harrison, a former BlackRock (BLK) portfolio manager and U.K. policy advisor, made the call in a recent interview, though the exact date and preferred maturities remain unconfirmed. His argument hinges on the idea that after such a steep rise, yields now offer compensation for inflation and policy uncertainty that was lacking earlier in the year.

The backdrop is a Federal Reserve that remains firmly focused on fighting inflation. On September 16, the Fed unanimously raised its policy rate by 25 basis points to 3.75%–4.00%, citing solid economic expansion and elevated inflation. That makes an imminent easing-driven rally less certain. Geopolitical tensions, particularly the Iran war escalation in July, have also lifted oil prices and revived inflation concerns, contributing to the bond rout.

Not All Bonds Are Equal

The pain has been widespread but uneven. Municipal bonds lost 5.9% in the third quarter, according to Morningstar, while floating-rate loans gained 2% as coupons reset higher. Janus Henderson (JHG)’s AAA CLO ETF rose 1.2% over the same period. The divergence highlights the importance of duration: long-duration funds, such as PIMCO Long Duration Total Return, lost 8.2% in Q3, according to Morningstar.

Harrison’s view is that higher starting yields now provide a cushion for new buyers. “What institutional investors like us are really focused on is regulatory stability,” he said at a recent conference, though that comment referred to Italy. For Treasuries, the calculus is simpler: with the 10-year above 5%, income alone can drive returns if yields stabilize. If inflation eases, price appreciation could follow.

But risks remain. If inflation stays elevated or energy shocks persist, yields could push higher, extending losses. Morningstar notes that long-term bond funds carried roughly 11.5 years of average duration, implying an 11.5% price decline for a further one-percentage-point rise in yields. Existing holders have already absorbed significant mark-to-market losses, and unlike individual bonds held to maturity, bond funds have no fixed maturity date for principal return.

PIMCO, an Allianz (ALV.DE)-owned asset manager with $2.26 trillion in assets as of December 2025, has long been associated with active fixed-income strategies. Allianz’s first-half results showed asset-management operating revenues of €4.5 billion, with internal growth of 15.8%. Harrison joined PIMCO as senior U.K. advisor in May 2025, bringing a blend of investing and policymaking experience. Before PIMCO, he spent nine years at BlackRock and served as chief of staff to former U.K. Chancellor George Osborne.

The Bigger Picture

The debate now is whether the selloff has created a genuine entry point or whether inflation persistence warrants even higher yields. Pension funds and insurers may find improved reinvestment opportunities, but the net effect depends on liability matching. For new buyers, the income available is materially higher than at mid-year. For existing holders, the losses are a reminder that “good value” does not mean low volatility.

Harrison’s call is a valuation argument, not a timing guarantee. The Fed’s September hike and its explicit prioritization of returning inflation to 2% suggest that the path of least resistance for yields may still be upward in the near term. But with the 10-year above 5%, the margin of safety has improved. As one portfolio manager put it, “You can create your own ideas”—but in bonds, as in private equity, the entry price matters.

Correction: An earlier version of this article misstated the date of Harrison’s appointment as senior U.K. advisor. It was May 6, 2025, not May 2024.