On the same day as Italian bond yields spike by the most ever, Bill Gross's bond fund was suffering a similar fate. The Janus Global Unconstrained Bond Fund crashed over 3% - its biggest drop ever - despite zero exposure to the Italian fiasco...
This was a major outlier, as WSJ reports, similar funds have returned, on average, a 0.22% decline in 2018, Morningstar said.
“Even for unconstrained bond funds, it’s rare for such a sharp decline,” said Todd Rosenbluth, director of ETF & Mutual Fund research at CFRA.
While it is simple enough to assume that Gross's fund was impacted by the collapse in Italian bond prices, it turns out the fund has zero exposure to Italy in at least its Top 20 holdings...
The largest positions are overwhelmingly short-duration US corporate debt... (though we do note the holdings of Aetna and Time Warner stock - since the unconstrained fund can hold non-debt instruments)
So was Gross Short US Treasuries (despite his recent towel-throwing-in as a bond bear)?
Or was he short Bunds (again)?
European investors had “piled into the region’s safe havens, namely German Bunds,” earlier this year after stocks declined sharply, Mr. Gross wrote. German bond yields, which had been on the rise as the nation’s economic picture improved, also plummeted, he said.
“Given these conditions, it is difficult to find the rationale for 10-Bunds to be yielding just 0.50% and yields on German government debt up to six years in maturity to be negative,” he wrote.
Or was it simpler... he was long US HY debt...