Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., kept its holdings of Treasuries unchanged in April as the securities gained the most in three months.
The proportion of U.S. government-related debt in the $230 billion Total Return Fund was 41 percent in April, the same as the previous month, the company’s website showed. Mortgage-bond holdings fell to 19 percent, the lowest level since July 2010, from 23 percent in March. The fund gained 0.7 percent in the past month, according to data compiled by Bloomberg.
Gross said this month Pimco still favors short-term Treasuries with maturities of five years or less.
For the markets, the “key is where the fed funds rate is going to be in 2017-2018,” Gross said in a radio interview on May 2 on “Bloomberg Surveillance” with Tom Keene and Michael McKee. “We think it might be around 2 percent.”
Policy makers’ median projection for the target rate, which has remained at zero to 0.25 percent since December 2008, is 4 percent for the “long run” beyond 2016.
Pimco increased its holdings in the U.S. credit category, which includes investment-grade and high-yield securities, to 12 percent, compared with 10 percent in March, according to the data. Holdings of money-market debt and cash-equivalent securities were 5 percent in April, unchanged from March.
Gross raised the Total Return Fund’s holdings of emerging-market bonds last month to 7 percent, from 6 percent. He increased non-U.S. developed debt to 11 percent, from 10 percent, the website data show.
Pimco, a unit of the Munich-based insurer Allianz SE, doesn’t comment directly on monthly changes in holdings or specific types of securities within a market sector.
The Total Return Fund’s U.S. government-related category includes holdings of U.S. Treasury notes, bonds, agency debt, interest-rate swaps and inflation-protected securities.
The fund gained 2.6 percent this year, lagging behind 66 percent of its peers. Last year it lost investors 1.9 percent, the most since 1994, trailing 65 percent of peers. It lost the title of world’s largest mutual fund in October to the Vanguard Total Stock Market Index Fund.
Treasuries returned 0.6 percent in April, the most since gaining 1.6 percent in January, according to a Bank of America Merrill Lynch index.
The Total Return Fund suffered its 12th straight month of withdrawals in April as it trailed peers.
Clients withdrew an estimated $3.1 billion, matching redemptions in March, Chicago-based Morningstar Inc. said in an e-mailed statement May 1. The outflows represented about 1.3 percent of assets as of March 31, Morningstar said.
Treasury long-term notes and bonds were the world’s best-performing government securities over the past month amid tamed inflation and slowing economic growth.
U.S. government securities due in 10 years and more returned 3.5 percent in the month ended May 6, the most of 144 debt indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies.
Futures prices put the likelihood the Fed will start raising borrowing costs by its June 2015 meeting at 46 percent, based on trading on the CME Group Inc.’s exchange. It was 41 percent a month ago.