Pimco Dumps Treasuries In July, Boosts Holdings Of 3-10 Year Securities In Another Example Of Fed "Anticipation"
Pimco's Total Return Fund has released its July portfolio composition. The most notable difference is the cut in US Treasury holdings from 63% (or $147 billion) in June to "just" 54% in July: an almost $20 billion reduction in UST holdings. And even as he cut his government holdings, Gross kept flat or added to all other asset classes, with MBS increasing from 16% to 18% of AUM, and EM holdings increasing to a record 11% of holdings. This is undoubtedly a function of his recently publicized interest in Brazil. The question is whether Gross' EM interest will suffer the same fate as his investment in non-US developed bonds, which peaked at 19% in February and has sine plunged to a low of 3% in June, to close July at 5%.
More importantly, parsing through the fund's maturity profile, we notice that Pimco's holdings now have the longest duration they have had in at least two years, and possibly ever: just 20% of Gross exposure is in sub-3 Year maturity paper. Gross' current sweet spot is in the 3-10 year part of the curve, which of course makes all the sense for the man having made his career by frontrunning the Fed - let's recall where the Fed recently announced it would be focusing its Treasury purchases.... yep - precisely the part of the curve where Pimco now has almost 60% exposure. Good work, Bill.