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PIMCO Still Short US Treasurys, Changes Reporting Methodology On Treasury Exposure; Has $85 Billion In Cash

Tyler Durden's picture




 

Pimco has just released its May Total Return Fund holdings data, and we are delighted to discover that following all the recent debate over whether PIMCO is or is not short Treasurys, the firm has relented and has actually changed the way it reports it exposure, which in turn is precisely just as we had speculated: a modest long cash position offset by a substantially larger swap short. Yet combining the three (the firm now breaks out its "Government Related" category into Government- Treasury, Government- Agency and Swaps and Liquid Rates, which had been lumped before), we find that on a Market Value basis PIMCO is still short government securities to the tune of -3%, a minimal increase in its exposure from April when this was -4%. Yet on a duration weighted exposure basis, the firm's Swaps and Liquid Rates, the flagship fund's positioning is a whopping -31! Just as importantly, semantics aside, TRF's net cash position declined from 37% of its $243.2 billion in AUM to...35%, or $85 billion in cash. Hardly much of a vote of confidence in US government paper.

This is how PIMCO used to present its government-related holdings before:

And now (link):

Full breakdown (on blended MW basis):

TRF effective duration: up from 3.42 to 3.73 primarily due to a modest increase in the 5-10 and 10-20 duration.

And elsewhere, confirming that the mainstream media has no comprehension of the nuances of the cash vs synthetic market, we read the following from Reuters:

Contrary to popular
belief, bond manager Bill Gross' bet against the United States has not
been in the U.S. Treasury market but in interest-rate swaps, according
to PIMCO's website on Thursday.

Did Andrew Ross Sorking write this? Perhaps Reuters can explain just what is the underlying on a short position in IR Swaps since it is not US Treasurys?

 

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Thu, 06/09/2011 - 15:17 | 1355357 Robslob
Robslob's picture

Yes, it is called short "Bernanke's"

Thu, 06/09/2011 - 23:27 | 1356884 bigelkhorn
bigelkhorn's picture

anyone who shorts bernanke is sure to win yes.

The guy I follow saying there could be more down for the market on friday. 

His site is over at http://www.forecastfortomorrow.com/Trading-Club   

his stuff is magic, live videos are insanly good! and he called the crash back in 2008, he doesn't charge $900 bucks a month to join his site like those other SO CALLED idiot gurus!, in fact its so cheap to be a VIP member, I was almost in shock!!!. Well worth a look. 

Thu, 06/09/2011 - 15:17 | 1355359 Cognitive Dissonance
Cognitive Dissonance's picture

Is that $85 Billion in 'real' paper currency, real electronic ones and zeros or real hard currency as in Gold and Silver?

Just askin'

Thu, 06/09/2011 - 15:40 | 1355427 NotApplicable
NotApplicable's picture

Money market, FTW!

Rumor also has it that they hold a substantial amount of unclaimed state lottery scratch-off tickets which they plan on leveraging once BABs are started up again.

Thu, 06/09/2011 - 15:55 | 1355479 Cognitive Dissonance
Cognitive Dissonance's picture

My operative inside PIMP-CO just snapped this picture of Bill Gross scratching away for today's take. It is rumored he prefers the "Bingo" game but will scratch anything (including the family jewels) if it means he can put off for another day writing that damn monthly column.

Bill Gross making money the old fashioned way. He scratches and claws for every single red cent.

Thu, 06/09/2011 - 16:37 | 1355583 knukles
knukles's picture

I love the smell of fresh scratched nut-sacks in the morning.

Thu, 06/09/2011 - 15:22 | 1355363 High Plains Drifter
High Plains Drifter's picture

just think. if pimco took 40 billion of that cash, and bought physical  silver and demanded delivery to his vaults , they would do quite well and something bad would happen in new york, and gross would be found floating face down in a drainage canal over in los angeles proper......

Thu, 06/09/2011 - 15:56 | 1355462 Dr. No
Dr. No's picture

demanded delivery

You cannot demand from COMEX, you can only request.  They have right of refusal and can settle with cash.

EDIT: Sorry, you did not mention COMEX in your post.  In theory they could buy from a bunch of sellers and take delivery per your plan.

Thu, 06/09/2011 - 16:12 | 1355514 High Plains Drifter
High Plains Drifter's picture

of course non of these big players like this, will ever do such a thing. because then the  paper game would be over and they know it.  the paper game is what gross and pimco are all about and have always been about. they try to survive in a sea filled with thieves. the music will stop one day. then we shall see.

Thu, 06/09/2011 - 16:50 | 1355624 knukles
knukles's picture

Well technically, one requests delivery of the underlying but it is not the clearing corp's obligation per se to make good on the aforementioned counter-party's short.  It is the short who must effect such delivery.  Now, it does become somewhat of a murky miasma when the vault-age of said underlying is maintained and quality standards pertaining to such deliverable grade are maintained by the clearing corp., but.... if said short can find enough underling physical to effect good delivery, then no stinky in Denmark.
And of course, as Correctly noted above, the COMEX clearing corp in the case of silver can just tell the long to go pound pud sand or shit and cause delivery to be effected in ETF shares or cash. 

How's about a warehouse receipt from the warehouse without the wares housed to receipt? 

Thu, 06/09/2011 - 15:22 | 1355368 baby_BLYTHE
baby_BLYTHE's picture

"I care not what puppet is placed upon the throne of England to rule the Empire on which the sun never sets. The man who controls Britain's money supply controls the British Empire, and I control the British money supply."- Nathan Mayer Rothschild

"Give me control of a nation's money and I care not who makes the laws."
- Mayer Amschel Rothschild

We are owned lock, stock and barrel. Have been for many years. No doubt the FED still serves the same interests today as they have from day 1.

It is a frightening reality that a Constitutional Republic such as the United States allowed itself to become entirely "captured" and "subservient" to these usurers

It will be very difficult to wrestle away control of the money supply from these usurers (like how much they resisted being audited just in these last few years). They will most likely cause a intentional Depression just like they did after Jackson took care of them.
However, it must be done if America is to once again be "The Land of the Free and the Home of the Brave"

Thu, 06/09/2011 - 15:36 | 1355412 SheepDog-One
SheepDog-One's picture

Well at least the fractional reserve fiat banking system is failing, just in its death spasms now and theyre going all out to keep it alive because the people who run it have never been able to live any other way than as parasites.

Thu, 06/09/2011 - 15:46 | 1355456 baby_BLYTHE
baby_BLYTHE's picture

However well intentioned they may believe themselves to be, I cannot stand money managers.

People like Gross that buy and sell debt, are indirectly messing with people's lives.

You're correct in saying the majority of the problems we face today are due to fractional reserve fiat currency.
The repeal of Glass-Steagall was the final safeguard removed that was akin to pouring gasoline on the currency. Since then, the dollar has been in total free fall.

Thu, 06/09/2011 - 16:21 | 1355548 Thisson
Thisson's picture

Your view is very naive.  Without the discounting of notes, people without cash on hand would be unable to, for example, have their roof repaired after it collapsed suddenly and unexpectedly.

 

Although I am against fractional reserve banking, I do believe that the discounting of notes (and taking on of risk in the process) is a productive enterprise that provides real value in the economy.

Thu, 06/09/2011 - 16:33 | 1355566 baby_BLYTHE
baby_BLYTHE's picture

don't think you saw my point.

I am fine with individuals investing whatever way they see fit.

Money Managers, on the other, specifically the Hedge Fund Hyenas, that have control over the investments of others and sometimes even buy/own politicians are by nature predatory. Not all, but many.

Thu, 06/09/2011 - 15:57 | 1355476 Reese Bobby
Reese Bobby's picture

Actually voters could end the Fed by the end of this decade if they wanted to.  The sad problem is that the average American is uneducated and/or feeding on the Government teat.  So yes, we are basically screwed.  But not a bad 200 year run...

Thu, 06/09/2011 - 16:51 | 1355658 knukles
knukles's picture

Methinks "land of the free" has taken upon some entitlement realated meaning usurping the original, noble intent, now better describing a foundation of modern societal problems.

Thu, 06/09/2011 - 15:24 | 1355370 10kby2k
10kby2k's picture

Ego--having to be right. Pimco lying about NOT being short during a rally. Flip flopping your past performance. I don't listen to any of that bull shit.

Thu, 06/09/2011 - 15:22 | 1355379 juggalo1
juggalo1's picture

How is $85 billion in cash a negative statement on government paper?  USD is government paper...

Thu, 06/09/2011 - 15:28 | 1355395 Coke and Hookers
Coke and Hookers's picture

Isn't USD fed/wall street paper? ;-)

Thu, 06/09/2011 - 15:28 | 1355396 SheepDog-One
SheepDog-One's picture

All of it just a mountain of paper notes, not worth anything more than toilet paper.

Thu, 06/09/2011 - 16:01 | 1355487 Reese Bobby
Reese Bobby's picture

It's that mysterious inverse relationship between interest rates and prices that varies with duration.  Pretty complicated stuff!

Thu, 06/09/2011 - 15:24 | 1355384 NotApplicable
NotApplicable's picture

Contrary to popular belief, bond manager Bill Gross' bet against the United States has not been in the U.S. Treasury market but in interest-rate swaps, according to PIMCO's website on Thursday. That's comedy gold! Of course, it's defensible, as they used the phrase "U.S. Treasury market" not "U.S. Treasurys."

"Why no, we didn't go short in the Treasury market! We we're in a completely different market."

Thu, 06/09/2011 - 15:27 | 1355393 RobotTrader
RobotTrader's picture

Heh, funny how Gross is now claiming he's placing his bets in the OTC Derivatives Casino.

Bet he hasn't a clue who the counterparties are, and whether or not he even gets paid if his bet is successful.

Thu, 06/09/2011 - 15:33 | 1355404 SheepDog-One
SheepDog-One's picture

Yea Im sure youre right, Gross and his $85 billion knows nothing.

Thu, 06/09/2011 - 15:32 | 1355410 NotApplicable
NotApplicable's picture

You mean there's a counter-party not named AIG?

Thu, 06/09/2011 - 15:42 | 1355385 Bam_Man
Bam_Man's picture

By paying the fixed leg of an interest rate swap, he (Gross) will win if either

a) Swap spreads blow up

and/or

b) The Treasury basis declines

Not a bad bet if you asked me.

Thu, 06/09/2011 - 18:35 | 1356050 Rainman
Thu, 06/09/2011 - 15:29 | 1355390 RobotTrader
RobotTrader's picture

Next major step in determining where the market is going next...

Is to find out which direction the "performance anxiety" is likely to lead to.

Where is the $85 billion going to go?  It cannot stay in cash forever.

- Corporate bonds?

- Common stocks?

- Commodity ETF's?

- Short more Uncle Gorilla Notes?

Thu, 06/09/2011 - 15:33 | 1355403 Spalding_Smailes
Spalding_Smailes's picture

Long-term treasuries

 

yup , yup

Thu, 06/09/2011 - 15:49 | 1355467 lizzy36
lizzy36's picture

We missed you the last 6 days.

Oddly you only come out when the market is up....looks like you might want to climb back in your hole again.

Thu, 06/09/2011 - 16:01 | 1355488 Spalding_Smailes
Spalding_Smailes's picture

I have been posting the last 4-5 days ( after 4 cst )

 

What rock did you crawl out from ... ?

Thu, 06/09/2011 - 16:13 | 1355517 Cognitive Dissonance
Thu, 06/09/2011 - 16:20 | 1355544 Spalding_Smailes
Spalding_Smailes's picture

My history bar ...

 

mon, tues, wed, thur ....

 

 

Thu, 06/09/2011 - 16:24 | 1355553 lizzy36
lizzy36's picture

Your revisionist history bar??

Alas, maybe they just changed up your shifts at the 7ve.

Thu, 06/09/2011 - 16:42 | 1355588 Cognitive Dissonance
Cognitive Dissonance's picture

You said you were posting the last 4-5 days. Now you have switched to visiting the last 4-5 days, which is what your 'history bar' indicates. 

Zero Hedge only tracks your posting for public disclosure. So the 'history bar' you are talking about is not related to your ZH posting. Unless of course you use several IDs and avatars and are confused about which ones you were using.

Thu, 06/09/2011 - 15:34 | 1355406 SheepDog-One
SheepDog-One's picture

Right long term treasuries, because the economic health of the US and dollar is so stellar.

Thu, 06/09/2011 - 15:32 | 1355408 Spalding_Smailes
Spalding_Smailes's picture

Right long term treasuries

 

The smart money

Thu, 06/09/2011 - 15:43 | 1355447 SheepDog-One
SheepDog-One's picture

The smart money for idiots maybe.

Thu, 06/09/2011 - 16:02 | 1355492 PhattyBuoy
PhattyBuoy's picture

Sitting on the sidelines until the dust settles ... makes a lot of sense.

Could be a long hot summer. Time to find a nice beach off the beaten path.

Thu, 06/09/2011 - 16:13 | 1355515 Stuck on Zero
Stuck on Zero's picture

I think it's time that some Wall Street entity starts a multi-trillion dollar naked short on US Treasuries.  If it's okay to inflict on the PMs it's okay to inflict on USTNs.  No matter how hard the Fed works to keep the price up the naked shorts will continue to flood in.  This should precipitate the USTNs to achieve their true value in "short order."

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