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Pimco Reports First Treasury Holding Increase In 2012, First Duration Increase Since October 2011

Tyler Durden's picture





 

Overnight, Pimco's flagship Total Return Fund posted its monthly update, with several notable highlights. First, total holdings in the fund rose to a record $260.7 billion, a $2 billion increase over April. Next, following months of consecutive reduction in the firm's Treasury holdings, the TRF reported its first TSY increase, rising from 31% to 35%, a modest number historically, but definitely a change in trend. It also appears that Gross has had his fill of MBS, which as we all know too well by know, is how he plans on frontrunning the Fed's next QE episode. At 52%, it was just a modest decline from the April 53%, and in dollar terms the $136 billion in holdings, is only the second highest ever. Still, it is notable that instead of continuing to load up on MBS, Gross is now "diversifying" into Treasurys. All other asset classes were relatively flat, with margin cash increasing slightly from -18% to -21%, or short $55 billion. Finally, the most interest data point has nothing to do with the portfolio structure, but the duration of holdings: the effective duration rose for the first time since October 2011, increasing from 4.61% to 4.81%. Is Gross finally taking a peek from underneath his shell and going to the long-end?

Monthly TRF holdings:

Monthly TRF duration:

 


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Tue, 06/12/2012 - 12:15 | Link to Comment Jack Sheet
Jack Sheet's picture

Shit, and I thought JP Morgan was the market...

Tue, 06/12/2012 - 13:13 | Link to Comment The Monkey
The Monkey's picture

Pimco was short treasuries on the way up. Gross nearly bottom ticked them.

Good luck Pimco. Dollar dilutive balance sheet expansion whispers in the wind.

Tue, 06/12/2012 - 12:15 | Link to Comment Hedgetard55
Hedgetard55's picture

What happens to PIMPCO when the bond bubble pops?

Tue, 06/12/2012 - 12:57 | Link to Comment fonzannoon
fonzannoon's picture

What happens to everyone's annuities and 401(k) when the bond bubble pops.

Tue, 06/12/2012 - 12:18 | Link to Comment Peter Pan
Peter Pan's picture

No matter what anyone tells me, I find investments in treasuries to be investments in yesterday's mistakes, yesterday's deficits, yesterday's lies. And those that believe that they represent value, forget that they rely on an increasingly sick economy coughing up the interest which in any case is at a rate that denies reward and encourages further governmental profligacy, malinvestment and lies. Anyone holding treasuries of any deficit nation deserves what will surely arrive suddenly and brutally.

Tue, 06/12/2012 - 12:21 | Link to Comment Cursive
Cursive's picture

Gross has got to be crapping his pants right now.  The next QE is a long ways off and the only thing that will help his extending duration bet would be OT2.  If mortgage rates start to rise and the Fed concedes this battle for now, Total Return shareholders could be in for a nasty EOY statement.

Tue, 06/12/2012 - 12:26 | Link to Comment Frozen IcQb
Frozen IcQb's picture

Maybe I missed a new class but isn’t duration measured in years?

Tue, 06/12/2012 - 12:46 | Link to Comment Frozen IcQb
Frozen IcQb's picture

% referring to price sensitivity. Thanks

Tue, 06/12/2012 - 12:27 | Link to Comment Aunty Christ
Aunty Christ's picture

the duration creep could've been caused by the negative convexity of his mortgage holdings

Tue, 06/12/2012 - 12:28 | Link to Comment disabledvet
disabledvet's picture

For the record I never saw the record (low rates.) blinded by the word "trillions" and didn't do even a smidgen of mental homework on it. Zero Couponers have KICKED OUR ASS...post downgrade no less! With negative yields in Europe...what else can you do but "pretend and extend"?

Tue, 06/12/2012 - 12:29 | Link to Comment MsCreant
MsCreant's picture

Gold popped wood all of a sudden. Wonder what did it?

Tue, 06/12/2012 - 12:31 | Link to Comment slaughterer
slaughterer's picture

That is SWISS and UGANDAN wood you are seeing in gold today.

Tue, 06/12/2012 - 12:52 | Link to Comment Dr. Engali
Dr. Engali's picture

Wow Bill buying treasuries after the run. You have been on the wrong side of this trade for a while. I'll bet you are on the wrong side of it again.

Tue, 06/12/2012 - 12:45 | Link to Comment asteroids
asteroids's picture

He must be praying Spain and Greece go tits up and everyone rushes to treasuries. That would make his year.

Tue, 06/12/2012 - 13:03 | Link to Comment cosmictrainwreck
cosmictrainwreck's picture

And that scenario is quite plausible, isn't it? Should be good for a day-trade, at least, but Billy's sure got balls betting the farm he can turn that battleship on a dime

Tue, 06/12/2012 - 12:54 | Link to Comment Seasmoke
Seasmoke's picture

guess he got nervous with his Securities NOT Backed by Mortgages

Tue, 06/12/2012 - 13:19 | Link to Comment Minyan Vince
Minyan Vince's picture

i think gross is/was more concerned with inflation than with front-running the fed...when a large bond asset manager wants to put on an inflation trade, he buys mbs, a little known tactic advocated by the great jeff gundlach...and if one believes the inflation train is pulling out of the station, then one would also short USTs...so i think gross, with this tactical switch is believing in the deflation theme, at least for now...

Tue, 06/12/2012 - 13:19 | Link to Comment Minyan Vince
Minyan Vince's picture

i think gross is/was more concerned with inflation than with front-running the fed...when a large bond asset manager wants to put on an inflation trade, he buys mbs, a little known tactic advocated by the great jeff gundlach...and if one believes the inflation train is pulling out of the station, then one would also short USTs...so i think gross, with this tactical switch is believing in the deflation theme, at least for now...

Tue, 06/12/2012 - 23:10 | Link to Comment monkeyshine
monkeyshine's picture

I think you got that right but it is mostly over my head now. I continue to straddle the "we're in a liquidity trap" fence. There is money but inflation is cornered. In fact inflation has been cornered for the last 15 years. It was cornered into the stock market in the late 1990s, then cornered into housing in the early to mid 2000s, then in the late 2000's into Commodities and then with the housing bubble collapse the stock market collapsed in a liquidity crisis so they printed and loaned and it was natural to fear inflation but so far no inflatin. Just hoarding and investing in stocks and bonds and commodities.

There is some irony here, because on one hand we have arms of the government (fed,treasury) wanting to print money, give out money, lower rates, and increase V1... and the other arm of the government (congress,regulators) wanting to make it harder to lend money, harder to borrow money. So right now as I type I lean towards liquidity trap. Yes we have slight inflation but we have less competition out there in almost all industries, higher barriers to entry in almost all industries, harder to lend money if you borrow it from the government, and harder to borrow money unless you meet certain equity ratios, equity which has been sucked out in part due to the lack of V1 and liquidity!

We spin.. that's the liquidity trap. I may change my mind tomorrow but as I type now, that's what i think.

Tue, 06/12/2012 - 13:19 | Link to Comment Minyan Vince
Minyan Vince's picture

sorry for the 2x post

Tue, 06/12/2012 - 15:18 | Link to Comment Lost Wages
Lost Wages's picture

I remember Charles Nenner saying he thought Treasuries will continue rising until Fall, then he is going long TBT while they go into a 40 year slump. I don't know what Gross will do at that time, but I will probably cash out half the money trapped in our 401K this Fall and spend it on gold. Right now it's in PTTRX and DIPSX. I had some stocks for awhlie, but ditched them for the rest of the year. All I really trust is my silver and some days not even that.

Tue, 06/12/2012 - 23:10 | Link to Comment monkeyshine
monkeyshine's picture

oops

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