PIMCO Sells $37 Billion In Treasuries, Adds Bunds, MBS And Cash As Total Return Fund Hits Record In December

Congratulations Bill Gross: PIMCO's flagship Total Return Fund closed December at $202 Billion, representing $70 billion in net inflows, more than the combined inflows of the prior three years. December also saw a curious reshuffling of TRS' portfolio: Gross sold a whopping $34 billion in Treasuries, bringing the total to $64.6 billion from $101.7 billion in November. And while the bond manager surprisngly added $10 billion in MBS (now accounting for 17% of holdings) after selling $95 billion in MBS to the Fed in the previous 10 months, for the first time (probably ever) PIMCO's holdings of Treasuries and MBS accounted for less than half of total holdings.

As was previously noted, Bill Gross notably increased his non-US Developed country bond holdings by $22 billion to $32.3 billion, which is a direct result of his recent purchases of German Bunds.

PIMCO continues to add to cash, and with a cash balance of $16 billion ($2 billion more than November), the firm has the most dry powder since the beginning of the crisis in August of 2008.

Lastly, the firm's high yield holdings jumped by 100% to a record $4 billion in December. Is PIMCO slowly becoming a hedge fund?

A market value weighted analysis of PIMCO's maturity profile indicates that the firm's holdings in sub-1  year maturing securities jumped from 0% to 7%. At least we know one of the window dressers who bought $14 billion in Bills for the EOY effect. Intuitively, the bills will likely be promptly (or not so promptly) converted back into another security form, implying that Pimco's real cash position at the end of 2009 was likely in the $30 billion ballpark, accounting for 15% of assets (obviously this is merely speculation). Just what is Gross waiting for?

Notably, the largest increase in holdings from a maturity perspective occurred in the 5-10 year bucket, where PIMCO added $23 billion in new securities to close the year with holdings of $54.5 billion. The largest holdings continues to be the 1-3 maturity bucket with $84.7 billion, a $37 billion decline from November.