A month ago, Bill Gross stirred up a storm in rates with his tweet that the "Bull bond market was dead [6]" which caught us by surprise because just in the preceding month, PIMCO's flagship Total Return Fund raised its allocation to government-related (read TSY) bonds to the highest in three years, with a net exposure of 40% of AUM, or about $117 billion. Of course, the data was backward looking so it was possible that the firm had changed its opinion entirely and in the following two weeks proceeded to purge its TSY holdings. It didn't. In fact, as of the May TRF holdings update [7], PIMCO's TSY holdings, which many expected to collapse, declined by a whopping... 2% of total from 40% (net of agency and swaps) to 38%. So much for the great Newport Beach rotation.
Perhaps more interesting is the distribution of paper maturity held by PIMCO. In May the TRF took its effective duration up modestly from 5.04 to 5.15.
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But most interesting was that in May the Total Return Fund, which clocked in $285.2 billion in AUM, saw its first decline (down $7.7 billion from the $292.9 billion the month before) since November 2011.