Pacific Investment Management Co. cut its holdings of Spanish and Italian government debt starting last month after a rally in the securities, according to Andrew Balls, the London-based head of European portfolio management.
“We’ve been reducing credit risk in our portfolios and in recent weeks we’ve cut Italy and Spain,” Balls said today in a telephone interview. “It’s a function of levels and fundamentals. The spreads look reasonable but not as attractive as they were.”
The sales took holdings of the securities close to “neutral” after Newport Beach, California-based Pimco increased its position to “overweight” last year, Balls said, meaning it now owns about the same amount of the securities as the index that it uses to measure performance.
The change in Pimco’s position was reported by the Wall Street Journal earlier today.
Italy’s two-year note yield fell to a record-low 1.125 percent yesterday, down from 1.99 percent on Dec. 31 and as high as 8.12 percent in November 2011. The yield climbed nine basis points to 1.25 percent today.
Spanish bonds have handed investors a return of 7.4 percent this year through yesterday and Italian debt gained 4.2 percent, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies.