Exclusive: Bill Gross Is Now Short US Debt, Hikes Cash To $73 Billion, An All Time Record

Tyler Durden's picture

A month ago, Zero Hedge first reported that Bill Gross had taken the stunning decision to bring his Treasury exposure from 12% to 0%: a move which many interpreted as just business, and not personal: after all Pimco had previously telegraphed its disgust with US paper, and was merely mitigating its exposure. This time, in another Zero Hedge first, we discover that it is no longer business for Bill - it has now become personal (and with an attendant cost of carry). In March, Pimco's flagship Total Return Fund (TRF) has now taken an active short position in US government debt: -3% on a Market Value basis (or $7.1 billion), and a whopping -18% on a Duration Weighted Exposure basis. And confirming just what PIMCO thinks of US-related paper is the fact that the world's largest "bond" fund now has cash, at a stunning $73 billion, or 31% of all assets, as its largest asset class on both a relative and absolute basis. We repeat: cash is more than PIMCO's holdings of Treasurys and Mortgage securities ($66 billion) combined. To paraphrase: in March PIMCO was dumping everything related to US rates (see chart below). This is the first net short position that PIMCO has had in Government-related debt since the Great Financial Crisis of 2008, and going positive in February of 2009 only after it became clear that the Fed would commence monetizing US debt one month later. This is the closest that Gross has come to making a political statement and is now without doubt putting his money where his mouth is. The only event that could possibly derail Gross' thinking is a huge market crash forcing a rush to Treasury safety. Alas, as has been made all too clear recently, US debt is no longer the safe haven it once was. Which begs the question: when will the TRF break out a "gold" asset holdings line item.

And another side effect of the firm's scramble away from debt and into cash is that the effective duration of TRF is now down to 3.6: only the second lowest since the 3.38 posted in December of 2008... when the world was on the verge of ending.

That Bill Gross is willing to risk a surge in redemptions (after all who would be wiling to pay PIMCO to manage a third of their assets in the form of supposedly devaluating cash) in order to make a statement about the credibility of the US government, and specifically the viability of its IOUs, is easily the only thing that the US government has to consider when evaluating the prospects for funding trillions and trillions of US deficits at "acceptable" rates in the absence of further quantitative easing by the Chairman.

If Gross is indeed right, something very wicked this way comes.


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anti Oligarchy's picture

How do we play it?

So I have a question for all the people so convinced the dollar is dead.

Are you smarter than Bill Gross? How much is your personal opinion scewing your view

What if..

Bill G sees a massive dollar rally coming. Goes to cash to wait for the run on debt. The only response for the US is raising rates He steps in to grab high yield bonds with cash.

bbpitcher30's picture


I just sent this to my 2 NJ Senators after Boehner blew it Friday night and Pimco has dumped T bills:


President Leadership is required to prevent IMF and G20 control over our economy – this summer!


Richard Nixon, a renowned stark hawk paved the way to relations with China.  No way could this have happened with a liberal Democrat.  This “China opening” resulted in many benefits.  We feel one right now.  They, along with the Federal Reserve have financed our increasing debt.  However this may end very soon (think Summer) and a dollar collapse may lead to IMF and G20 control over our economy.  This can result in a drastic change in life as we know it in the US.   IMF/G20 may impose 50% or more entitlements cuts due to a bankrupt US. Our best chance to avert this is for our radical leftist President to come out and state:




My dear Americans:

Our economy may collapse in a few months due to our ever increasing debt.  We can no longer borrow 43 cents of every dollar we spend this year. Our creditors may soon balk at buying T bills.  They may have better investments elsewhere or need to address their own internal economic investments. Due to the economic consequences of Japan’s earthquake/tsunami,  Japan’s leadership has informed me that their ability to continue to finance our debt has virtually disappeared. Our other foreign creditors have gotten to a point where financing US debt may result in steep investment losses, unless we act now.


We can not let our total government debt double 4 years to 18 trillion dollars.  I will not allow this.  I have painfully learned hard economic facts.  I will do everything possible to improve our financial status to the point where our creditors will view the US T Bills as an investment that will result in positive returns.  I therefore am calling for immediate action on Paul Ryan’s budget plan.  Although I have some differences with it, I applaud Mr. Ryan’s meticulous economic analysis and genuine attempt to save our entitlements, and more importantly our nation as we know it.  Let us work together, revise it so that it reaches broader support.  Nevertheless let us agree on the trillions of dollars it calls for over the next decade.  Once we pass this I am confident our creditors will view the US as a stable place to invest in.


If we do not act before this summer, time may run out.  Why?

Our creditors have witnessed our fight to decrease our budget by only 1% or $38.5 billion.  This is only good for no more than 10 days as we increase our total debt by 4 to 5 billion per day.  Investors in China now may increasingly view internal investments as their middle class has been growing, instead of buying our T bills.


The dollar has lost 14% of its value past 10 months.  This may accelerate.  Our Fed has been averaging $4 billion a day financing our debt since November (our debt increases 4-5 billion per day).  No wonder the 10 year T Bill is only 3.5%.  If the Fed backs off QE2 in July,  rates will increase and we may witness  a severe US Dollar collapse.  Pimco, the world's largest bond fund, already sold off all of their T Bills few months ago.


Let us not look back and blame wars, tax cuts, sincere but economically naive attempts growing entitlements.  Let us not blame Democrats or Republicans.  One factor for this stark change in policy is due to the economic consequences of Japan earthquake/tsunami.  Japan’s leadership has informed me that they their ability to continue to finance our debt has virtually disappeared. Let us address the present and future and save our nation.  I therefore have asked Secretary Geithner to closely work with Congressmen Ryan, Boehner, Pelosi, Senators Reed and McConnell to finalize a deal by the end of June.  I have also asked several consultants to assist in this process.  These consultants are our (or have been) our key creditors.  They include investors from Pimco, T Rowe Price, Fidelity, sovereign debt managers from Saudi Arabia and Kuwait, China.


pledge to you today that improving our economy is priority #1.




Far fetched – yes but not impossible.  Obama is bright.  What gains can he envision in a bankrupt US?  He must step out of the belt way box, take a deep breath, and unemotionally assess our paths.  He may then conclude that he is in a rare position to embark on a history making mission to save the US economy.  If so then history will judge him in very, very high regard.


Senator – Please present this to our president.


slewie the pi-rat's picture

you lost slewie @ "Richard Nixon... paved the way to relations with China."

what a fukin nut job! get some help!

Reese Bobby's picture

You do know your Senators are Frank Lautenberg & Robert Menendez, right?

Try starting your letter again:

My Dear Americans,

Organized crime has always played an important role in our critical labor unions!

trav7777's picture

lol...you actually think NeObama is at all engaged in what is going on?

Besides, the left will never tolerate any cuts in the payola for their constituency, nor can they de-fund the wars.

Look at it this way, running 1.5-2T deficits has worked so far, so why not keep trying it?  They'll throw overboard some art funding and shit like that, but the core problems remain unaddressed

bbpitcher30's picture

go to blog Economics501.wordpress.com to read more about Boehner blowing it, including my comments to Dick Morris.

bob_dabolina's picture

I'm not quite sold. Work on your pitch.

AmazingLarry's picture

Can someone explain to me why he'd add an assett like gold to a "bond fund?" 

jmcadg's picture

I agree with earlier posts. Gross is positioning for Bernanke to end QE2 early. 

Markets and commodities tank. Everyone screams for Benny to recrank the presses, Ben says 'Told you so', then commodities spiral, Gold and Silver to the moon.

In that time $ rises, Gross buys in to PMs and stocks while low and cleans up.

He's just waiting to fill up along with JPM et al.

Hyperinflation here we come. Anyone else agree with this seemingly simplistic view?

web bot's picture


I've been saying this for the last 2 weeks. A massive sell off is coming. It will take out PM shorts... we're looking at a correction.... then a ride to the moon over the coming months.

arnoldsimage's picture

i take it's time to go long the dollar.

SilverRhino's picture

Hello 41 dollar silver right out of the gate. APMEX SILVER jumped 15 cents in the first minute of trading.

41.15 ask

SilverRhino's picture

Hello 41 dollar silver right out of the gate. APMEX SILVER jumped 15 cents in the first minute of trading.

41.15 ask

bob_dabolina's picture

In the next 30-60 days I think gold and silver will be down 5-10% from current levels (no positions in either metal, I am closed out)

I think NatGas will be up which I have just recently started buying into.

I think the dollar will be up.

slewie the pi-rat's picture

well, bob_d, i hope yer right about the LNG.  since there are no more markets, only interventions, i hope your lack of "positions" in Ag & Au does not indicate lack of the physical and that you are "all paper, all the way".  maybe you own a ranch or some antique cars, or a shitload of expensive rifles, or some nice boxes of estate jewelry and 5 sets of sterling flatware, and maybe a coupla racehorses. 

or, maybe yer net worth is so astonomical and well-diversified you truly have no worries except to gamble on the criminally-controlled crimex, for fun.

i'm not arguing about what you "think" will happen in certain markets.  and, if you closed out paper PM's and rang the cash register, great! 

but, if no phys. PM's, and just after-tax "cash"?  nuf sed, friend...

bob_dabolina's picture

Perhaps I sold too early...

Doesn't mean I can't buy back at a more advantageous price.

It is, what it is, brother.

I have never been hurt by taking a profit while it was rich in the money.

(phys held from years back)

topcallingtroll's picture

If u started buying in the late nineties there is no shame in taking profits.

I only quadrupled my money in gold and silver before.cashing out. I am happy. You cant time everything perfectly.

bob_dabolina's picture

I am a terrible market timer.

Than again, I get lucky once in a while.

slewie the pi-rat's picture

no disrespect, bob_d, just a bit agape that you might be quite successful and not have some physical "insurance" and admittedly slewie-ignorant of yer reality, to boot.

jaw now closed.  t.y.!

topcallingtroll's picture

I agree with his thesis except natgas going up past its highs for the year.

Paper has done me incredibly well. I have owned lots of gold and.silver but only have a small silver position well.

Anytime people have gathered on a hill waiting on the.end of the world because some.guru said it was going to happen soon.....well....they have always been disappointed.

I think paper has its place in a diversified portfolio. We will see in ten years, but i dont think from this point forward silver and gold will have the best ten year return of any asset class. Buying silver at 41 is an incredible act of faith.

evolutionx's picture

Inside report from Fukushima nuclear reactor evacuation zone

two japanese guys went by car to the nuclear power plant of fukushima and show the increasing radiation and the devastation of the evacuation zone. Its a real horror trip:

german site - just watch the video

Fukushima: drive to the deathzone

belogical's picture

Thanks, that was incredible 

MiningJunkie's picture

My silver rocket just gapped open at $41.00 per ounce...

NEVER underestimate the replacement power of equities within a Zimbabwe-esque Spiral...and Bill Gross would have a tough time going long metals within a fucking BOND FUND...

RobotTrader's picture

The Cartel appears to have collared silver under $41 for now.

Blythe is flexing her brute force with an infinite supply of paper short tickets.

doggings's picture

I reckon Billy boy could give them a run for a few days with his $73 billion

SilverRhino's picture

>> The Cartel appears to have collared silver under $41 for now

41.18 ask now @ kitco ... so much for collaring.

Bastiat's picture

Yeah: $41.15.  Looks like Blythe huffed and puffed and soiled her pants again.

bbpitcher30's picture


I am very angry at Boehner and now more worried than ever about a US Dollar collapse.  Today's politicians know zilch about finance.  Many never produced a dollar for the economy.  Incredible that politicians could not approve even a 2% budget haircut for a budget that has grown 28% in 2 years.  The 38.5 billion is not a done deal.  We must convince our representatives to vote it down, ask for more -- or have the IMF and G20 take control of our finances after dollar collapse and give all of America a 50% of more entitlements haircut.

topcallingtroll's picture

Angry at boner?

His party controls 1/3 of the government.

He got an amazing deal, considering.

Be angry at the socialists and other leftards who control the majority of the government.

The tea party will reduce much much more if you will elect more of rhem in 2012 and get rid of the redistribitor in chief currently occupying the office

slewie the pi-rat's picture

jeeez bbpitcher!  wilya take a coupla tokes or drinks and just put a fukin cork in it, pls?

what you say may be more reality-based than 1/2 the psychoses, here, ok?

but the debbie downer mystique doezn't play well to this crowd, either, ok?

please be advised.  peace.

truont's picture

 In March, Pimco's flagship Total Return Fund (TRF) has now taken an active short position in US government debt.

Fascinating.  Gross has some brass cajones.

So, who still thinks that the bond market has not peaked?

Gross knows no matter how much quant easing the FED does, interest rates will go up.

Game over for bonds.

Bastiat's picture

Unless he's an actor in some planned drama way beyond my conspiracy theory pay grade, Gross better stay out of small planes, cars and hottubs.

topcallingtroll's picture

This worries me a little that gross.doesnt believe the end of qe2 is priced into the market.

I dont know how it couldnt be priced in. Ben has made it clear no qe3 right away.

How can the end of qe2 be a surprise and generate additional returns to his market timing strategy?

I guess we will see.

proLiberty's picture

What way to play this?  Go long TBT??


topcallingtroll's picture

I think the end of qe2 is mostly priced in.

blindman's picture

@"I think the end of qe2 is mostly priced in."

as is qe3.  also armageddon,  priced in.

mynhair's picture

No, TMV, or whatever the hell it is.

The 10 yr short.

(Sorry, just found out I'm allergic to the variant of mint I grow for catnip.)

topcallingtroll's picture

I think the end of qe2 is mostly priced in.

fellatio is not fattening's picture

I am long the TBT Sept. 40 call, trading at $2.40 and just $1.05 out of the money, this gets me through the June period and I think 2 more Fed meetings. 

Wm the Shrubber's picture

With M2 having surged over $1TR and those balances sitting idle as excess reserves at the Fed, could it not be that the Fed will "direct" its banking members to mobilize those reserves and begin quietly taking up the slack in treasury auctions left by their standing down?  This would be tantamount to a stealth QE3.  I'm not sure how this could be handled in the reporting, but I put nothing past those slippery buggers.

trav7777's picture

I must disagree with Gross...as long as Japan is WANTONLY printing Yen, there is an immense tailwind for all "risk" assets and for PMs and oil.  The global yen carry is, more than anything else, what has driven EMs to where they are and this will likely continue.

If the Fed raises rates, this could paradoxically attract yen funding into our bonds.  Irrespective of this, the US and various major debtors like Illinois cannot fund at substantially higher rates

bob_dabolina's picture

But the FED will raise rates.

So fuck you

slewie the pi-rat's picture

+++  these guys do have fun together and know how tf to "Z" too!

trav's real "hook" for me is: an immense tailwind for all "risk" assets... where he fails to differentiate between real assets and "paper" assets, while still mentioning PM's & oil!!!

well argued, indeed!

fellatio is not fattening's picture

This obviously makes getting to the office by 6:30 (PST) not a priority.  Just call El-Arian, "Hey Muhammad, hows the cash?  OK, be there soon"