Two Corporate-Bond CEFs Yielding Over 9% Amid Market Volatility

Two corporate-bond CEFs, PIMCO Dynamic Income Strategy Fund (PDX) and PIMCO Access Income Fund (PAXS), yielded 10.1% on average in April. Since then, PDX has outperformed PAXS with a nearly 12% average total return. PAXS still offers a 12% yield, while PDX's yield has fallen to 9.8%. The higher yielder is not always the bigger short-term winner, and lower-yielding CEFs tend to bounce higher after a market panic.

In the second quarter of 2025, two corporate-bond closed-end funds (CEFs) managed by PIMCO, the PIMCO Dynamic Income Strategy Fund (PDX) and the PIMCO Access Income Fund (PAXS), demonstrated significant differences in performance. While both funds yielded 10.1% on average in April, PDX has since outperformed PAXS with a nearly 12% average total return. PAXS, however, continues to offer a 12% yield, while PDX's yield has fallen to 9.8%.

The performance disparity highlights a common investing principle: the higher-yielding CEF is not always the bigger short-term winner. Lower-yielding CEFs tend to bounce higher after a market panic, as seen in the case of PDX. This phenomenon underscores the importance of considering both current yield and long-term prospects when evaluating CEFs.

PDX's performance can be attributed to several factors. First, the fund has been trimming its energy exposure, which was a significant drag on performance earlier in the year. Second, the fund has been reallocating its assets into more traditional fixed income products, such as asset-backed securities and agency mortgage-backed securities. This shift has the potential to generate more monthly income and narrow the discount to net asset value (NAV).

Moreover, the fund's largest holding, Venture Global (VG), has shown signs of recovery. VG's stock price has increased by around 150% since its post-IPO low, helping to boost PDX's NAV. The fund continues to hold 15.7 million shares of VG, despite the company's recent setbacks. The fund manager believes that VG's prospects for capacity ramp-up and successful operation, as well as a resolution to its arbitration case with major customers, could provide further upside.

In contrast, PAXS has maintained its high yield but has not seen the same level of performance as PDX. The fund's high yield may attract investors looking for income, but it also comes with higher risks, such as lower liquidity and a higher discount to NAV.

In conclusion, while both PDX and PAXS have their merits, PDX's recent performance suggests that it may be a more attractive investment for those seeking both income and capital appreciation. However, investors should carefully consider their individual risk tolerance and investment goals before making any decisions.

References:
[1] https://seekingalpha.com/article/4801203-pdx-cef-buy-before-discount-closes
[2] https://seekingalpha.com/article/4801605-bad-news-for-pimco-cef-vehicles