So Much For Pimco Buying Bonds: Duration Weighted Treasury Exposure Hits Whopping -23% Short, Cash Surges To Unprecedented $89 Billion

Tyler Durden's picture

So much for all the conspiracy theories that Bill Gross was capitulating in his short position against US debt even as he continued to bash US fiscal and monetary policy. According to just released April data for the flagship Pimco $240 billion Total Return Fund (which saw a $4.2 billion increase in AUM in the month), Bill Gross actually added to his short position against US government debt, bringing total market value exposure to 4% of AUM or ($10) billion. More amazing is that on a Duration Weighted Exposure basis, the firm's Treasury short is 23%, read that again, 23%! So much for that change in outlook. Additionally, Gross also sold another $8.3 billion in mortgage securities, bringing the April total to a nominal $57.8 billion. Spring cleaning at casa de Bill continued across all fixed corporate income as well, dropping the firm's exposure to IG by $1.6 billion and to HY by $2.1 billion. The only two securities which saw a token increase was in Non-US developed markets and Emerging Markets, to $14.4 billion and $26.5 billion, respectively. Yet the biggest shocker of all, is that Gross has now brought his cash position to an all time unprecedented high of $89.1 billion! That's right, PIMCO is charging a substantial asset management fee when 37% of all assets are in cash. One would think the mattress would cost far less. Either Gross is expecting a huge collapse in the bond market (so contrary to prevailing though), or this could well be the bet that buries the Allianz subsidiary.

Looking at the maturity exposure there are no surprises: in keeping with the firm's move to almost an all cash fund, Effective Duration dropped to the second lowest in history, or 3.42 years. As the chart below shows, Gross' exposure to debt with a maturity under 5 years is a whopping 83%. Which begs the question: just how terrified is Gross of inflation to be cutting virtually any and all 5 year + exposure. And yes, if the firm was expecting a deflationary collapse, the duration exposure would be flipped upside down.

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bob_dabolina's picture

Party @ Pimco! Bring your Huggies, they are predicting quite the shit storm.

Ahmeexnal's picture

Bill Gross is going to buy up PHYSICAL SILVER AND GOLD!

camaro68ss's picture

So is this good for Ipad2 and netflix or not????

CPL's picture

Depends how well ipads stand up as shingles.  Netflix is a tough one, would be like trying to build a house out of unused gym memberships...


I predict a complete shit storm on open across the board of all markets.  It should give the FED the kick it needs to print more money though.

camaro68ss's picture

your right, you can dig up Ipad2 out of the ground for what, like 5 bucks? hahaha

Manthong's picture

WTF do you do with $89B in cash?

I suppose that much in paper notes could keep the furnace at the Pimco Building going for a while.

I've seen pictures of that being done before. 

Harlequin001's picture

More to the point, who's going to pay up for this short when he tries to collect?

The Fed, of course. The money supply is about to go ballistic with QE3, 4 and 5 in rapid succession.

Congress is going to be very busy raising the debt ceiling again and again and again...

and pm's will go ballistic with it.

Mec-sick-o's picture

That's a nice wrecking ball.

I have some ideas... monopsony of PM perhaps?

CPL's picture

Depends on the landfill in India, I'm sure a street urchin could do it for $4.  Knock the gut out of them to make a nice picture frame to hang on my BreX wallpaper in den while pulling a mixture of Enron, and Lehman brothers shares out of the Kleenx box.  To make sure their value doesn't blow away I'll put my newton on top of them.


I'll then look out the window at my impressive windmills built with real CLNE stock and straws making me zero money.  Gentlely drawing the stylus from my Palm Pilot, I'll pick my teeth and wonder if it had been any different...

Ahmeexnal's picture

I hear ya. Still have a couple 2100s and one 2000.

Papasmurf's picture

A geniune Enron or certificate is worth good money on ebay these days.  No so much for the FRN.

SheepDog-One's picture

It all depends on how absorbent IPad2's are, maybe better for folks to just put on the adult diapers for the shitstorm thats here.

Goldman Hufs's picture

Can gross hypothetically buy American Silver Eagles while sticking to mandate of the fund or would the premium over what it could be used to purchase items in a store negate this option?

Sisyphus's picture

JEWELRY BUYERS in India stood in line to Buy Gold on May 6, as shops opened early for the festival of Akshaya Tritiya.

And you thought people stood in line overnight to only buy iMaxiPads and iTrackPhones


Yep, let the price collapse and see how soon Gold disappears. One word - Asia.


Figures from the World Gold Council show India as the world's largest gold market. India accounted for nearly 32% of global demand in 2010, at 963 tonnes of Gold Bullion. The second largest market was China, which bought 579 tonnes.

Quaderratic Probing's picture

He sees rates climbing and will buy US debt with the 89 billion. He will not buy silver or gold or copper or oil as he sees a USD back at 120 from 73 and in that case commodities will be trash. You me him ..... who has the trillion? He did not get there by being wrong............come to think of it the bond market is always right

Atlas Shrieked's picture

Do you even know what happens to bond prices when rates climb?  I hope you're saying he's waiting for rates to soar, and THEN step in and buy bonds.  The only reason he can't buy tangible assets because it is not mandated.  He's answered this question before.

Quaderratic Probing's picture

Yes Bond price will collapse and he will not care hes in cash

Quinvarius's picture

He could buy up all the silver on the COMEX, 71 times over with that scratch.

Don Quixotic's picture

Not with the new position limits they're about to institute, he can't... doesn't matter how much money he has. Yay for free market capitalism.

Ahmeexnal's picture

New position limits mean squat when PHYSICAL is being bought at all scales, from ant operation to multi-ton deals.

JPig Mormon is about to suffer one major blow, given by none other than themselves.

Let them pull the trigger on those position limits. A lot of people have been reading about silver's rise/fall these last couple weeks. They've been to many silverbull blogs.  Most of them have been EDUCATED. You'll be surprised at the percentage of them who have been able to connect the dots.  And now they await a good entry point.

JPig Mormon is about to unleash an avalanche that will bury COMEX once and for all.

FOC 1183's picture

vs. their benchmark, that is huge

vast-dom's picture

the only sane position is to short bonds. unfortunately market read Fed manipulation is for me illegal bitch a la COMEX et al. $cam$ abound!

Pepe's picture

"Hyperinflations offer monetary economists a natural experiment they can use to study the effects of money on the economy" -we all know that bernanke is a scientist at heart and uses the experimental method

youngman's picture

He is going to need all that cash to cover his margins as they keep raising the requirements to 100%...

Boston's picture

Depending on how well Bill Gross was hedged, the last month could have been very painful for him.

I totally faded him.



bob_dabolina's picture

It will be so cool watching this debt ceiling drama play out. 

Trillions in cuts vs. Liberals. 

Someone is going to have to capitulate in this game of Texas Fold'em. Will the Dems see eye to eye with the Republicans or will the Republicans chicken out and concede to less than trillions in cuts? 

We got reputations on the line here (for whatever that's worth in Washington) and some junior members looking to make a name for themselves. 

The Right has very valid arguments to back up their positions and the Left has sycophantic megalomaniacs that believe borrowing is the best way to get out of debt. 

Will be fun watching this rope geting tugged.

NotApplicable's picture

As long as its not around our neck.

LowProfile's picture

When your assets are outside the system.

Gavrikon's picture

And when the bastards create some kind of precious metal redemption tax/fee?  Or, what the hell do I know, make you have a digital tattoo to buy or sell anything? 

Sorry, sorry.  Apocalyptic fit is over now.

duncecap rack's picture

Will it be fun if they get rational and focus on the revenue side of the equation also?

bob_dabolina's picture

Can't worry about the revenue aspect until you put a tourniquet on the area hemorrhaging, which is the spending side. 

I think taxes need to be raised across the board, however, it's useless without a prudent plan to stop the bleeding. 

When I was in the Marines we had the 4 life saving steps: 

Stop the bleeding;

Start the breathing;

Protect the wound;

Treat for shock;

The reason you stop the bleeding first is because what's the point of pumping on a casualties chest with CPR if all you're doing is pumping his blood out of a severed artery? It's the same concept here. If you don't stop the spending, the tax increases don't do much. 

Interesting homework assignment: 

If you were to take every CENT from EVERY US billionaire (100% tax on all assets) How much would the deficit (or national debt) be reduced by? Now once that 1 time tax levy is instituted it can never again be touched (because now we don't have anymore billionaires). How do you solve the remaining and ridiculous amounts of debt we would still have? It's the spending side where the real problems are and they require aggressive action a.k.a stop the bleeding.

JFK.4PREZ's picture

1 dollar = 1 second

1,000,000 dollars = 11.5 days

US Budget Deficit = 457,000 years




LawsofPhysics's picture

The "rich" are already eating each other.  The debt is a fraud, their "wealth" is a fraud.  Crash the fucking system already.  The sooner we do, the sooner compensation will return to people who are actually worth a shit. 

Augustus's picture

Taking 100% of the assets of all US billionaires would not clost the deficit gap for 2011.  Once that is pissed away by the congress craps, they can move on down the line to all assets for anyone over $750 million.  that will help with the 2012 gap.

When they try to move down to the $500 milllion they will find that the money has vanished to money heaven in some other country.  Never to return.

sabra1's picture

it's all just political theatre to give the illusion of haggling back and forth. they all have the same puppet masters!

riley martini's picture

 You nailed it they will collect bribes, bonuses and votes all along the way as the brain-washed party minions cheer " we're winning " when they think their party masters have won a point.  They will need large gathings with the finest trimming money can buy and guess who gets the bill.

Gubbmint Cheese's picture

Given the severity of this situation I think its best to assume Pimco is llying...

NotApplicable's picture

Isn't China's effective duration also around 3.5 years?

augie's picture

that is an absurd amount of money.

astartes09's picture

So if the Fed stops buying the debt at the end of June, and then no other country wants our debt, what happens?

bob_dabolina's picture

Interest rates go down /sarc

bbbb but why would no other country want our debt?

We're AAA+ according to the rating agencies. 

camaro68ss's picture

Rate hit the moon, the government collapse under its debts, then the rabies virus mutates and turns people into zombies starting a zombie apocalypse.

ok maybe the 2nd might not happen but it might as well happen. People will be roming the streets like zombies after there 401k's takes a shit and all aspects of the economy come to a hult.

quasimodo's picture

I really do hope the 401k takes a huge fucking dump. Can't convince the old lady to take the hit and cash the fuckers out; methinks I will have one big case of "told you so"

All she can say is "stuff goes in cycles"


Gavrikon's picture

While mine wants to cash out and buy more physical metals.  I agree, except that she wants to wait until the end of the year to pay the tax and 10% penalties.  Last week proves it's better to bite the bullet earlier.

Gavrikon's picture

While mine wants to cash out and buy more physical metals.  I agree, except that she wants to wait until the end of the year to pay the tax and 10% penalties.  Last week proves it's better to bite the bullet earlier.