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Pimco Raises Government Debt Holdings in Flagship Fund

PIMCO Co-chief Investment Officer Bill Gross
Bill Gross, co-chief investment officer of Pacific Investment Management Co. (PIMCO), anticipates the central bank will become more accommodative under Janet Yellen. Photographer: Andrew Harrer/Bloomberg

Pacific Investment Management Co.’s Bill Gross raised the percentage of Treasuries and other U.S. government-related debt in his flagship fund in October after the Federal Reserve unexpectedly maintained its bond purchases.

The proportion of U.S. government and related debt in the $248 billion Total Return Fund climbed to 37 percent from 35 percent the prior month, data on Pimco’s website show. Mortgage debt fell to 34 percent from 35 percent in September. The Newport Beach, California-based company doesn’t comment directly on monthly changes in holdings or specific types of securities within a market sector.

Gross has been recommending that investors purchase shorter-term Treasuries as the Fed weighs tapering its bond buying under the quantitative-easing stimulus strategy and the market underestimates how long it will then take the central bank to begin raising interest rates. Gross anticipates the central bank will become more accommodative under Janet Yellen.

The U.S. is growing slowly and inflation levels are at “unacceptable, dangerous territory at the moment,” Gross said in a Nov. 8 radio interview on “Bloomberg Surveillance” with Tom Keene. The Fed is “moving into forward guidance in a big way, and at some point we may expect to see a nominal GDP target as well as a higher inflation target in the United States.”

Fed Vice Chairman Yellen faces a confirmation hearing Nov. 14 after being to succeed Ben S. Bernanke as chairman.

Holdings Figures

U.S. credit, which includes investment-grade and high-yield securities, rose to 10 percent from 9 percent. The category was previously separated into two sectors called investment grade and high yield.

The Total Return Fund’s emerging-market debt holding was at 6 percent, the same as in September.

Over the past five years, the Total Return Fund has returned 7.66 percent, outperforming 70 percent of competitors. It gained 0.36 percent over the past month, outperforming 71 percent of its peers, according to data compiled by Bloomberg.

The fund’s government and Treasury debt category includes holdings of U.S. Treasury notes, bonds, agency debt, interest-rate swaps and inflation-protected securities.

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