PIMCO Treasury Holdings Plunge To Two Year Low, Cash Holdings Surge, Total Return Fund AUM At Lowest Since June 2010

Did Larry Meyer (the one man Fed "expert network") lose Bill Gross as a client? Because looking at PIMCO's latest holdings shows a dramatic shift in strategy and leaves one wondering just what PIMCO is doing. After the firm had been buying MBS on margin like it was going out of style, peaking in June when the company's cash margin balances hit a local record of 15%, resulting in MBS holdings surging to 51% of the company's flagship Total Return Fund, ever since then it seems Gross' bet on MBS as benefiting from either massive putbacks to the banks, or QE3 being focused on mortgage backed securities has fizzled. Most notable in the January update is the huge change in Treasury holdings, which have plunged from 22% in December to 12% in January, a $24 billion drop. This is the lowest relative holding of government securities by PIMCO since January of 2009 when it was a 2% short exposure. The other result: cash has surged from a 7% short position to a 5% positive: the firm no longer is utilizing margin for the first time since August 2010. The other issue: the company's holdings of Muni securities continues to be a black eye, resulting in a continued decling in total TRF AUM: in January it hit the lowest since June 2010 of $238.5 billion (it peaked at $255.9 billion in October). Bill Gross can not be too happy about these various developments.

Total monthly spread of TRF:

And just as troubling, PIMCO's average duration of holdings was at 4.42 years, the lowest since April 2009!