Duration In Pimco's Total Return Fund Soars To Near Record, Highest Since 2007 In Anticipation Of QE3

Tyler Durden's picture

Bill Gross came, saw, and i) stopped shorting govvies, and ii) doubled down on QE3, after, as he himself said, he did not anticipate how bad the US economy would get. As the just released latest monthly Total Return Fund data indicates, PIMCO now has a substantial net long position in Government Related securities, at $51.5 billion (net of swaps), a more than 100% increase from the $22.1 billion in July (and a far cry from the $9.6 billion short in April). As a reminder, Gross skepticism was predicated by the concern of who would buy bonds in an inflationary environment coupled with the end of QE2. Well, since then the bottom fell out of the market, and the Fed is about to re-enter the securities market to prevent the latest re-depression with Operation Twist if not much more. So while it no longer makes sense to be short bonds (as Gross has figured out the hard way), what makes sense is to be very, very long duration, since this is what the Fed will be buying in Operation Twist/Torque. Enter Exhibit A - the chart of maturity/distribution of PIMCO holdings, of which most notable is the explosion in average holding duration, which from 4.56 in July, has soared to 6.27 in August, the highest since 6.23 in October, and possibly the highest on record (that said our records only go back to 2007). As part of this expansion, Gross has seen his Mortgage Securities soar to $78.5 billion, the highest since February, when Gross was actively reducing his MBS holding profile, and now is doing the opposite, and is accumulating Agency paper hand over fist in an attempt to extend duration. Bottom line: Pimco is now balls to the wall in the QE3 camp, first to be manifested by Operation Twist, and then, likely by outright Large Scale Asset Purchases. Look for numerous other copycat investors to expand the duration of their fixed income holdings from 4-5 to over 6.

Total PIMCO holdings:

Pimco Maturity and Duration distribution:

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Spitzer's picture

He was short treasuries because he thought the economy would improve.

Wrong for the wrong reasons. What an idiot. It also proves that he is a total keynesian.

Who gives this moron money ?

Deadpool's picture

Bill Gross is a book talking pimp who made many fortunes on the 40 year bull market in treasuries. Selling to Allianz set him up for life and now he's just a Mercedes maxist with a sweet pad on the beach where he does yoga and collects stamps. pimp-co is a fee sucking fraud and as the US yield curve goes flat line like Japan his fee for management days are numbered. Better swap those stamps for St Gaudins, Billy!

ParisianThinker's picture

Isn't this the goal? He has "made it".

A.W.E.S.O.M.-O 4000's picture

But he'll still take my money, right? I mean, it's not too late to get into PIMCO, right?

GeneMarchbanks's picture

That's right, Gold futures bitchez

Spitzer's picture

Yeah. The gold bears (the general public, Dennis Gartman and Nuriel) are all licking their chops, wanting to see the gold market crash to zero just because gold had a bad day today.

TheTmfreak's picture

By bad day, you mean of course bad day for those who haven't realized that this means one can purchase more real value with no value.

Twiggles's picture

Exactly! as a youngin  I want 1000 gold again; =>  income stream = more kruggies

theotheri's picture

Buying gold today is like taking a NINJA loan in 2006.

Josh Randall's picture

QE3 - Baked in since day one -- its the only tool these tools have left

SheepDog-One's picture

And the funny part is next weeks FOMC will deliver no QE3 free trillions for stocks, todays action is total proof of that. If QE was coming, theyd all just position short and ride it down to 10,000 or 9,500 or so....no deal, theyre emergency recovering all declines no matter what criminality it takes.

If no conditions existed to deliver QE3 at Jackson Hole, then they certainly dont exist now!

QE3 is DOA. Prepare to get a couple trillion subtracted from it all.

TradingJoe's picture

Sheep, my guess is that Gross is just another govwhore, he wasn't IN the last time and lost, now he's back with the gang and has the inside scoop! Or not?! I am certain of ZERO money on Tuesday but are they or simply begging they think will get them what they want?! I highly doubt there will be anything as long as politically unattainable!

TruthInSunshine's picture

Fading Bill Gross is a safe bet these days, however.

He never got the Maximus red paint splashed across his chest that the Monetary gods use to express approval (I also noticed that Lord of The Flies Blankfein & his motley crew at Goldman have either been set up as an election year fall guy or have really and truly fallen out of favor given what are going to be hundreds of significant lawsuits over the Abacus-Hudson-Timberwolf, etc saga, and more).

He's to bonds what Bill Miller's been to equities, as of late.

Mike2756's picture

Buy tbt for a retrace to 30?

cosmictrainwreck's picture

after-hours would indicate such....they like it here

SheepDog-One's picture

Well Bill Gross is about to be cornholed big time when no QE trillions are delivered a week from now. 

DefiantSurf's picture

that would be fun to watch, but you have to wonder if his statements are contrarian and he's playing the other side of the trade...

SheepDog-One's picture

Gross has been batting .000, I dont count on him being suddenly right now.

thepigman's picture

I dunno....if ZH has his duration right at over 6, he almost couldn't be more bearish for an intermediate bond fund.

jmcadg's picture

Baked in, but not yet. Ben's gotta see markets get slaughtered first. S&P >900.

Bill Gross' got keep his brown trousers on a bit longer yet.

SheepDog-One's picture

Which day between now and FOMC 7 days from now is Ben going to let the S&P proceed to 900??

HpDeskjet's picture

QE3 won't lower rates, just like QE1 and QE2 rates will go higher... QE is not about interest rates, it is about equities/other risky assets since more QE delays the inevitable depression a bit longer, so PIMCO will be wrong again

Belarus's picture

It has to be more the Operation Twist on Sept. 21st. That is what the maket expects already--at minimum. There must be LSAP coming.....and that is something Bill Gross has front-run to 100% of perfection. 

SheepDog-One's picture

There has to be a $3 trillion announcement to account for all thats been baked into these clown markets since Feb when they started baking in QE3 to every bit of bad news.

SaveTheGreenback's picture

Aside from buying physical Silver, shorting Treasuries is probably the most attrative long term investment opportunity...

Does anybody disagree with the notion that rates will go up violently in a few years and hyperinflation is on the way?   game over when that happens...

LOL! Will they actually promote auctions for 30-year bonds with negative yields?  Might as well cut a check to each American for $50 so we can buy some silver.

SheepDog-One's picture

'In a few years'? Made me chuckle...thanks.

Why will rates suddenly go up in 19% unemployment USA and who will back up those rates?

CvlDobd's picture

Yep, Japan rates went sky high.

SheepDog-One's picture

Sorry to tell you but Japan is not in any way the US.

Johnny Lawrence's picture

Love you, SheepDog...but I disagree with you 1000%.  Japan is an incredible blueprint for what's happening right now in the US.


And I've said this a million times...being bearish on bonds has and continues to be the most anti-contrarian trade around. 

treemagnet's picture

Its like Ben wants the Euro to go first.  I suppose that way he can print at least as much money floods in to the dollar safe harbor with little or no change to the dollars value, plus whatever "go big" number his keynesian pals have in mind.  Wall street will be publicily begging - print, tv - begging like a junkie for another hit.

Belarus's picture

Aside from buying physical Silver, shorting Treasuries is probably the most attrative long term investment opportunity..

Great minds must think a lot alike. If your a long-term investor, shorting treasuries in the biggest no brainer the world we ever see. Over the long term, say no less than 3 years, there is simply absolutely no way yields stay low.....

That is something that even that Pimp, Warren Buffett, and I can agree on. Treasury bubble in full swing. Either things get better and yields ultimately go higher or they don't improve and they keep printing money. Either way, treasury yields are going far higher in the years ahead. But who has time to think of in years...when getting paid in cash could become meaningless. 

thepigman's picture

Except QE3 ain't what you think it is........ refi-o-rama combined with

continual fed buying of MBS with the refi proceeds.....net net, a wash.

SheepDog-One's picture

So QE3 will be an announcement to come to the bank with a $5,000 to refi and sign a mortgage the bank doesnt have now....and that will be met with wild market euphoria?

QE3 of 1% house refi rate aint gonna cut the mustard, theyve baked in trillions worth of free money into these equities. Whatever they do will be a wash, best case scenario. I believe they have hit the wall here, when they rely on a stupid rumor daily to stick save the dead markets.

monopoly's picture

He was wrong last time, and he will be wrong again. Agree, investors leave money with his company.

High Plains Drifter's picture


virgilcaine's picture

In the 1929 era this was called front running i believe.. it is illegal.  Crash here we come for no other reason than this cesspoll has to be flshed out.

cocoablini's picture

If he is big into bonds suddenly, the 7 and 10s will flatten just because everyone will race there. A self-fullfilled prophecy. Is Gross dumping short notes?

runforthehills's picture

JGB's have been on a bull run for more than 20 years: http://goo.gl/qYM14

not a suprise the slimy "bond king" is not short anymore 

dcb's picture

he's going to loose again. Qe raises inflation expectations, therefore yeilds rise, therefore you short them with QE.How many times you need to see the pattern? if yopu wanted to buy jun bonds, with QE I could understand that.  I only play the l;ong end of the curve anyway

Deadpool's picture

None of what you say is automatic. Japan has a flat yield curve with no growth and low inflation. Aka stagflation. Expect that scenario before higher rates.

max2205's picture

It's not like Bill to chase yield ESP when bonds are up 30% in the last 3 months. Timmmauh must have put a gun to his head and told him to get on board. TLT to 2.5%?????

Downtoolong's picture

That's investing for you; even when you're right you can still be wrong. If you can't beat em, join em, especially when the bonus deadline is around the corner.


JW n FL's picture




New item in your series of interest:

IMF Survey: F&D Spotlights Widening Gap Between Rich and Poor The disparity between the haves and the have nots is increasing, according to Finance & Development magazine. Some say that inequality doesn’t matter as long as markets work and economies grow so that everyone gets more. But research finds advantages to reducing inequality.




More or Less

Finance & Development, September 2011, Vol. 48, No. 3

Branko Milanovic

PDF version

Income inequality has risen over the past quarter-century instead of falling as expected

INEQUALITY is growing. Disparities are increasing—between the rich and poor in individual countries, and until recently, between countries. The global financial crisis is keeping real incomes stagnant in advanced economies but it probably narrowed global inequality between citizens of the world, because most developing countries continued with strong growth. Some say that inequality doesn’t matter as long as markets are working efficiently, or if everyone is getting more. Others argue that inequality hampers growth, or that only so much disparity is ethically acceptable.



F&D Spotlights Widening Gap Between Rich and Poor

By Marina Primorac
Managing Editor, Finance & Development

September 12, 2011

  • Income inequality within countries is rising, research shows
  • Global financial crisis probably narrowed inequality across countries
  • Equality is important ingredient in sustainable economic growth

The disparity between the haves and the have nots is increasing, according to an article in Finance & Development (F&D) magazine by inequality expert Branko Milanovic.



msmith's picture

TNX - 10yr treasury yields continue to drop.  Lower yields ahead.  Forecast here http://bit.ly/nEZHgF

Richard Whitney's picture

Bill Gross is LONG? The bell has rung.

TBT at 22.25!!!!!

theotheri's picture

The 10 yr is toast but not for 2+ yrs.....

Gold is gonna get slaughtered....
Silver back below $30 real soon...

Mrs Kensington's picture

I'm with SheepDog! No way the Bernank can do QE now - the window of time has passed for those little un-checked, un-bridled games.  They are just using the talk to keep things up - and the power of empty talk will run out soon.  There are too many new checks in place, including the inflationary threat of social unrest, in a country where guns are in most homes.

1. The Republicans agreed vehemently that the Fed needed full scale reform ystdy and that the dollar must be its number one priority.  The Reps will win in 2012 and the Banks know it......  Reps and Banks need 2008 reprise to finish Obama off.

2. The Debt Ceiling detail has yet to be agreed - deadline 30 September.  No way can a Keynesian geyser rush of printing occur during this time.

3. Gold is going down.  Insiders know that the last 2-300 dollars in the price are QE3, 4 and 5 based

Most we will get is Twist - but with less dollars than people think - and not till SPX below 1000