Pimco’s Contrarian U.S. Treasury/MBS Bet Amid 2025 Tariff-Driven 'Sell America' Calls Pays Off

This analysis is based on the Bloomberg report published on December 4, 2025, detailing Pimco’s successful contrarian bet on U.S. Treasuries amid tariff-driven market turmoil [5]. On April 2, 2025 (dubbed “Liberation Day”), President Donald Trump announced sweeping punitive tariffs, triggering a sell-off in U.S. Treasuries [2]. 10-year Treasury yields jumped from 4.01% on April 4 to 4.48% by April 11, peaking at 4.63% in May 2025, eroding bond prices and leading to widespread “Sell America” calls [2][0]. These calls were fueled by concerns that tariffs would undermine the U.S. dollar’s reserve currency status and Treasuries’ safe-haven appeal, particularly among Asian investors holding $7.5 trillion in U.S. assets [4]. Contrary to this narrative, Pimco—with over $2 trillion in assets under management (AUM)—held its existing positions in 5-to-10-year Treasuries and MBS, and increased its holdings during the sell-off. The market rebounded sharply by December 4, 2025: the iShares 7-10 Year Treasury Bond ETF (IEF) gained 4.18% from its May low to $96.67, while the iShares MBS ETF (MBB) rose 4.76% to $95.16, resulting in significant absolute gains for Pimco [0][5]. The rebound reflected market recognition that tariffs’ inflationary impact was milder than feared, and Treasuries retained their status as the world’s primary safe-haven asset amid global economic uncertainty.

1. Contrarian Investing Amid Market Panics Delivers Returns
   : Pimco’s success highlights the value of sticking to fundamental asset properties (Treasuries’ safe-haven status) rather than reacting to short-term, fear-driven narratives. The “Sell America” calls were based on immediate tariff fears, but medium-term fundamentals prevailed [5][0].
2. Resilience of U.S. Safe-Haven Assets
   : Despite policy shocks, U.S. Treasuries and MBS remain the global standard for safe-haven investments. The rebound defied expectations of a permanent loss of demand from foreign investors, at least in the medium term [4][0].
3. Policy-Driven Volatility Creates Opportunities
   : The tariff-induced sell-off created a buying opportunity for investors with a long-term view, as evidenced by Pimco’s gains [2][5].
4. Scale Amplifies Contrarian Bet Returns
   : For a firm with $2 trillion in AUM, even modest percentage gains (4-5%) on a significant portfolio allocation translate to substantial absolute returns [5].

1. Tariff Escalation
   : Further expansion of tariffs by the Trump administration could reignite inflation concerns and trigger renewed selling of U.S. assets, undermining current bond market gains [2].
2. Foreign Investor Diversification
   : Asian and European central banks may continue to diversify away from U.S. Treasuries over the long term, reducing demand and pressuring yields upward [4].
3. Interest Rate Volatility
   : Unexpected Federal Reserve rate hikes could erode bond prices, counteracting any tariff-related market stabilization [0].

1. Contrarian Opportunities in Policy-Driven Panics
   : Similar market sell-offs driven by short-term policy fears may present buying opportunities for assets with strong fundamental safe-haven status [5].
2. Monitoring Safe-Haven Asset Flows
   : Tracking Treasury International Capital (TIC) data can provide insights into foreign investor sentiment, helping identify potential turning points in bond markets [0].
3. Inflation Data Analysis
   : Continued assessment of tariff-induced inflation impacts can inform positioning in bond markets, as seen in the 2025 rebound when inflation fears moderated [2][0].

This analysis synthesizes data on the 2025 “Liberation Day” tariffs, the resulting “Sell America” market narrative, Pimco’s contrarian investment strategy, and the subsequent bond market rebound. Key data points include:

• 10-year Treasury yields spiked from 4.01% to 4.63% between April and May 2025 before declining.
• IEF (7-10 Year Treasuries) and MBB (MBS) rebounded 4.18% and 4.76% respectively from their May lows by December 4, 2025.
• Pimco’s $2 trillion AUM allowed even modest percentage gains to translate to significant absolute returns.
• The rebound underscores the enduring safe-haven status of U.S. Treasuries, despite short-term policy shocks.

Decision-makers should consider the balance between short-term market reactions to policy announcements and the long-term fundamentals of safe-haven assets, while monitoring tariff escalation, foreign investor sentiment, and Federal Reserve policy for potential impacts.