Pimco's Gross dumps U.S. debt

Pimco total return fundClick the chart for more details about the fund and its performance. By Ken Sweet, contributing writer


NEW YORK (CNNMoney) -- Pimco's Total Return Fund (PTTRX), the world's biggest bond fund, slashed its exposure to U.S. government debt to zero last month.

It's the second month in a row that well-known fund manager Bill Gross has drastically reduced Pimco's exposure to U.S. government debt.

Gross has been very vocal about his feelings toward U.S. interest rates, saying in January that they were "robbing" investors and that U.S. government debt should be "exorcized" from investors' portfolios.

The Total Return Fund held about 22% of its holdings in U.S. government debt as recently as December, but reduced those holdings to about 12% in January.

Pimco defines U.S. government-related securities as not only U.S. Treasuries but also government agency debt, interest rate swaps, futures and options and FDIC-guaranteed corporate securities.

Gross's comments typically carry considerable influence on investors because his Total Return Fund is by far the world's largest bond fund with more than $240 billion in assets under management. It's also the best-performing bond fund for the last 15 years, according to Morningstar.com.

In his February newsletter, Gross said he believes U.S. Treasuries are trading at a yield of 1.5 percentage points below where they should be historically, making them an unattractive place to invest for the time being. Gross also reiterated that stocks and bonds may struggle this summer when the Federal Reserve ends its second quantitative easing program.

"Yields may have to go higher, maybe even much higher to attract buying interest," Gross wrote.

At the same time that he reduced his exposure to U.S. government debt, Gross vastly increased his cash and cash-equivalent position last month. Cash now makes up 23% of the portfolio compared to the 5% of the portfolio the fund had in January. The fund also increased its holdings of overseas emerging market bonds to 10% of its assets, up from 5%.

The Total Return Fund also reduced its exposure to mortgage-backed securities to 34% of the portfolio, down from 42% of the portfolio in January.

The price on the benchmark U.S. 10-year note rose slightly Thursday, pushing the yield down to 3.44% from yesterday's 3.47%. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.12%4.18%
15 yr fixed3.25%3.21%
5/1 ARM3.48%3.32%
30 yr refi4.18%4.17%
15 yr refi3.30%3.21%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 17,042.90 -28.32 -0.17%
Nasdaq 4,493.39 -12.46 -0.28%
S&P 500 1,972.29 -5.51 -0.28%
Treasuries 2.51 0.02 0.68%
Data as of 6:18am ET
Company Price Change % Change
Ford Motor Co 14.79 -0.32 -2.12%
Bank of America Corp... 17.05 0.04 0.24%
eBay Inc 56.63 3.97 7.54%
Apple Inc 100.75 0.64 0.64%
General Electric Co 25.62 0.20 0.79%
Data as of Sep 30

Sections

CNNMoney's Italian-American investing correspondents did a taste test of Olive Garden's food. They agree with hedge fund Starboard: It's not very appetizing. More

Even limited air operations could cost up to $4 billion a year, says a think tank, while large ground forces could cost $1.8 billion a month. More

Pro-democracy protesters in Hong Kong are using FireChat to improve communication and organize. More

On Wednesday, 17% of First Green Bank's 66 employees will get a raise under the company's new "living wage" program. The guarantee: At least about $30,000 a year. More

This mom of four only makes $29,000 a year and is losing $400 a month because the state is garnishing her paycheck over a debt. Now she is about to be evicted from her apartment. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.