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

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: