© 2019 Dow Jones & Company. All Rights Reserved. THE WALL STREET JOURNAL. Monday, August 19, 2019 |B1

TECHNOLOGY: SPORTS VIDEOGAME PUBLISHERS ENJOY A WINNING STREAK B4

BUSINESS&FINANCE

downgrades.

The newfound restraint of

large companies is one factor

behind this surprising develop-

ment.

AT&T , for example, has

opened each of its earnings

calls this year by raising a topic

that has been much on inves-

tors’ minds: debt reduction.

Making that subject a prior-

ity is somewhat unorthodox

among American companies

but has been much appreciated

on Wall Street, where assessing

the economic fundamentals of a

handful of large, heavily in-

debted companies has con-

sumed investors and analysts

for months.

AT&T’s unusual effort is a

sign that “even their sharehold-

ers are focused on their ability

to pay down debt,” said John

Sheehan, a fixed-income portfo-

lio manager at Osterweis Capi-

tal Management.

AT&T, the world’s largest

nonfinancial corporate bor-

rower, has sold assets and used

free cash flow to reduce its net

debt by roughly $9 billion since

the start of the year. Anheuser-

PleaseturntopageB9

As more large companies
such as AT&T Inc. pay down
their debt and lower their risk
profiles, investors are flocking
to corporate borrowers whose
credit ratings cling to the low-
est rung for investment-grade
bonds.
Triple-B-rated corporate
debt this year has outpaced
other grades, belying fears that
a sector that has ballooned
during a recent boom in merg-
ers and buybacks was vulnera-
ble to a wave of potential

BYSAMGOLDFARB

Lower-Rated Bonds Benefit

As Big Companies Slash Debt

Pacific Investment Man-
agement Co. investment chief
Daniel Ivascyn is in a slump,
hurt by a bet on housing
bonds and investors’ flight to
safety.
For much of the past de-
cade, Mr. Ivascyn’s Pimco In-
come Fund has posted stellar

BYJUSTINBAER

Last Week: S&P 2888.68g1.03% S&PFIN g2.16% S&PIT g0.31% DJTRANS g2.35% WSJ$IDX À0.45% LIBOR3M 2.136 NIKKEI 20418.81g1.29% See more at WSJ.com/Markets

returns. Its surging popularity

made it the world’s largest ac-

tively managed bond fund and

helped salve the wounds at

Pimco left by the acrimonious

2014 departure of Mr. Ivas-

cyn’s predecessor, Bill Gross.

So far this year, though, the

fund has returned 4.68%, fall-

ing short of the fund’s bench-

mark index and nearly all of

its peers, according to Morn-

ingstar Direct. Among 338

funds in its category, Pimco

Income has underperformed

93%, Morningstar said. In the

past month, the fund is down

1.02%.

In an interview Sunday, Mr.

Ivascyn traced the fund’s re-

cent struggles to the weak-

ened performance of trades

that had powered the fund’s

rise. Timely bets on mortgage-

backed securities, for example,

had been a big part of the

fund’s strong returns.

But housing debt has un-

derperformed corporate bonds

this year. While neither con-

sumer- nor corporate-debt

markets have shown many

signs of stress in 2019, inves-

tors have tended to gravitate

more toward bonds tied to

companies, he said. With in-

terest rates declining, more

homeowners are paying off

their mortgages in advance.

That has hurt returns on

mortgage bonds backed by the

U.S. government.

Trade tensions between the

U.S. and China over the past

month have also hurt. Those

tensions have led U.S. stocks

to sell off and more money to

move into safer investments

such as government and cor-

porate bonds.

“Mortgage credit has just

sat there,” Mr. Ivascyn said.

In addition, Pimco Income’s

mandate as a fund for inves-

tors seeking higher payouts

has left it largely on the side-

lines during the recent rally of

safer, longer-term and there-

fore lower-yielding, bonds.

The fund seeks to avoid bonds

with yields that slip below the

expected rate of inflation, Mr.

Ivascyn said.

As for his bet on mort-

gages, Mr. Ivascyn said “we’re

very happy to be underweight

corporate credit risk even

though it’s done better this

year.”

Mr. Ivascyn’s confidence

stems from Pimco’s long-held

belief that the regulations ad-

opted after the financial crisis

would keep banks from mak-

ing as many riskier home

PleaseturntopageB6

Pimco’s Housing Wager Turns Sour

With mortgage bonds

underperforming, this

year’s return is below

nearly all of its peers

The billions of illegal robo-

calls inundating Americans are

being facilitated largely by

small telecom carriers that

transmit calls over the inter-

net, industry officials say, but

authorities are at odds over

what—if anything—they can

do to stop them.

These telecommunications

carriers typically charge frac-

tions of a cent per call, earn-

ing their money on significant

volume. Their outsize role in

robocalls has become apparent

as large telecom companies

get better at tracing robocalls

to their source, spurring calls

for regulators to hold them ac-

countable.

“There are definitely repeat

offenders who keep showing

up as the sources of illegal

robocalls,” said Patrick Halley,

a senior vice president at US-

Telecom, a trade association

of telecom companies that

runs a robocall-tracing group.

“Carriers that knowingly allow

the origination of billions of

illegal robocalls should be held

accountable.”

U.S. regulators have con-

flicting interpretations of their

ability to take the companies

to court, however. And carri-

ers aren’t explicitly required

to try to differentiate between

legal and illegal robocalls, fur-

ther clouding enforcement.

There are many legitimate

uses for robocalls, such as

when a bank wants to

alert customers to a data

breach. Such calls are illegal,

however, when used by scam-

mers to solicit money or per-

sonal information from con-

sumers under false pretenses,

or when they flout consumer-

protection rules such as mak-

ing calls late at night.

Relatively few calls flagged

as high risk of being illegal

robocalls—13%—originate

from numbers owned by major

telecom carriers, including

AT&T Inc., Verizon Communi-

cations Inc. and T-Mobile US

Inc., according to TNS Inc.,

which provides network and

data services to the telecom-

munications industry.

Instead, most of the traffic

is generated by illegal robo-

callers with help from little-

known companies that have

been identified in traceback

searches by USTelecom, indus-

try officials say.

In interviews, representa-

tives of several smaller carri-

ers said it is hard to differen-

tiate between legal and illegal

robocall traffic.

Both types of calls rely on

similar technology. Legal auto-

mated calls, such as notifica-

tions for school closings and

prescription refills, often use

the same internet-based dial-

ing platforms that illegal robo-

callers abuse.

In effect, scammers are ex-

ploiting principles wired into

PleaseturntopageB2

BYRYANTRACY

ANDSARAHKROUSE

Small

Carriers

Stymie

Robocall

Fight

CLOCKWISE FROM TOP LEFT: DEEN VAN MEER; WALT DISNEY/EVERETT COLLECTION;KERRY BROWN/20TH CENTURY FOX/EVERETT COLLECTION; MARVEL/EVERETT COLLEC-TION; 20TH CENTURY FOX/EVERETT COLLECTION; WALT DISNEY/EVERETT COLLECTION

Disney Finds Fox Studio a Tough Adaptation

LOS ANGELES—About three months
after Walt Disney Co. acquired Twenti-
eth Century Fox, the two studios
hosted a red-carpet premiere in
Hollywood for the X-Men movie
“Dark Phoenix,” the first major
Fox offering since the merger.
Before the event this sum-
mer, Disney sent Fox executives
and staffers a 13-page memo out-
lining exactly how the event should go. Men
were to shave, and women were to “wear
light makeup.” Workers were encouraged to
wear a wristwatch since using a phone, ei-
ther to check the time or to take pictures,
was a strict no-no. And Fox employees were
to make sure the movie’s stars weren’t
chewing gum on the red carpet, according
to the memo, which was seen by The Wall
PleaseturntopageB2

0

10

20

30%

2010 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19

Disney

37.6%

Fox

3.7%

BYERICHSCHWARTZEL

Toy

Story 4

$424m

Aladdin

(2019)

$353m

Avengers:

Endgame

$858m

Alita:

Battle Angel

$86m

The Kid

Who Would

Be King

$17m

Dark

Phoenix

$66m

High-profile hits fueled Disney’s box-

office gross this year, giving the

entertainment giant a much larger

share of the domestic market than Fox,

which has had several misses.

INSIDE

Note: Data are for U.S. and Canada and

as of Aug. 11. Source: Box Office Mojo

RETAIL

Nordstrom seems to

have done everything

right—but still suffers

fate of other chains B3

TECHNOLOGY

Toronto lures Silicon

Valley companies with

its diverse

population B4

HEARD ON

THE STREET

Deere holds up better

than its customers

amid trade fight B10

SIPHIWE SIBEKO/REUTERS