Wednesday, March 9, 2011

World's Largest Bond Fund Has Dumped all U.S. Government-Related Securities

Pimco's Total Return Fund, the world's biggest bond fund, has dumped all U.S. government-related securities, including U.S. Treasurys and agency debt, reports CNBC.

Bill Gros, the fund's manager, has warned about the 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 percent of its assets in "equity-related" securities, such as convertibles and preferred stock, after the first quarter of 2011.

The Total Return Fund's cash holdings have surged to $54.5 billion as of Feb. 28 up from $11.9 billion at the end of January.


  1. The Fed: the lender of last, first and only resort for the US Government.

  2. I don't mean to be dumb, but what does it mean when Pimco's "cash holdings" are way up? I mean, a lot of people in this context say "cash" when they actually mean "short-term Treasury securities," right?

  3. Interesting. The market seems to have largely shrugged in response to this; do most investors really believe that the government monetizing this debt will have no effect on the value of their Treasury holdings?

  4. FWIW, a former Pimco insider's comments (he does manage to spell his own name wrong):

    @Future-Krugman-Debate-Winner: my understanding is that "cash" means literally cash. If some is parked in short term (3 mos. or less) safe securities, than the terminology "cash and cash equivalents" or "cash and short term securities" must be used. It's likely, though, that Pimco is holding cash equivalents, and the article has simply abbreviated to "cash".