Wednesday, September 10, 2008

A Gross Bailout

In the days leading up to Treasury's bailout of Fannie Mae and Freddie Mac, Bill Gross had been hyperventilating on CNBC and other media venues, aggressively calling for a government bailout of the two. 

FT with  details of the Gross result:

The Bill Gross-managed Pimco Total Return fund reaped a $1.7bn payday following the US government takeover of home loan giants Fannie Mae and Freddie Mac.

While shareholders in Fannie and Freddie suffered deep losses, the world’s biggest bond fund saw its highest ever one-day rise against its benchmark index on Monday, benefiting from the bet made by Mr Gross on mortgage bonds issued by the agencies.

Gross had made a big shift out of US Treasuries and corporate bonds over the past year and into agency bonds, betting that the government would support Fannie and Freddie Mac. By May this year, more than 60 per cent of his $132bn fund was in mortgage debt.
-Robert Wenzel

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