Pimco reduced the weighting of U.S. government debt holdings in its flagship Total Return Fund during July after three months of increases.
Bill Gross, who manages the fund, cut the weighting to 54 percent of fund assets in July from 63 percent in June, which was an eight-month high. Pimco’s U.S. government debt holdings are still well above April’s weighting of 36 percent.
The data were published on the firm’s website.
The U.S. government debt category includes Treasuries, agency debt, Treasury futures and options and bank debt backed by the Federal Deposit Insurance Corp.
While Pimco didn’t offer a rationale for the move, it could be that Gross thought the recent rally in Treasuries has pushed yields so low that other sectors of the bond market are more attractive.
He increased his mortgage-backed securities weighting to 18 percent in July from 16 percent in June. And the fund’s share of emerging-market debt rose to a record 11 percent from 10 percent in June.
Gross raised foreign developed-market debt to a weighting of 5 percent from 3 percent in June.
Despite Gross’ moves, many investors expect the rally in Treasuries to continue.
"The combination of a weaker outlook for growth and inflation and a Fed that is poised to engage in another round of quantitative easing have led us to become more bullish on longer-dated Treasuries," Julia Coronado, senior economist at BNP Paribas, told The Wall Street Journal.
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