Pimco's Bill Gross© Jason Reed / Reuters
PIMCO's Total Return Fund , the world's biggest bond fund, has dumped all U.S. government-related securities, including U.S. Treasuries and agency debt, a source familiar with the fund's holdings said on Wednesday.
In January, Pacific Investment Management Co.'s $236.9-billion (U.S.) Total Return fund slashed its U.S. government-related debt holdings to the lowest level in at least two years and increased cash and debt holdings from other developed nations.
Government-related securities include Treasuries, Treasury Inflation-Protected Securities, agencies, interest rate swaps, Treasury futures and options, and corporate securities guaranteed by the U.S. Federal Deposit Insurance Corp.
The Total Return Fund's cash holdings had surged to $54.5-billion as of Feb. 28 from $11.9-billion at the end of January. A PIMCO spokesman declined to comment for this story.
Bill Gross, the fund's manager who helps oversee more than $1.1-trillion as PIMCO's co-chief investment officer, has often railed against U.S. deficit spending and its inflationary impact. He has advocated buying bonds with "safe," higher yields - such as corporate bonds - that can withstand possible erosion of returns by inflation.
In December, PIMCO said it may start investing up to 10 per cent of its assets in "equity-related" securities, such as convertibles and preferred stock, after the first quarter of 2011.
"It's certainly an important signal in the sense that they are allocating away from Treasuries in favour of a higher spread product," said Christian Cooper, head of U.S. dollar derivatives trading at Jefferies & Co.