Pimco Takes Record MBS Position Even Higher, Dumps Treasurys

The trend continues: as has pointed out here every month for the past five months, Pimco's Bill Gross continues to layer into the "NEW QE" trade, only this time he is making it more clear than ever that he is certain that the Fed will have no choice but to monetize Mortgage Backed Securities. Indeed, in March the firm added another 100 bps in its MBS exposure, bringing the total to 54% of total, or a record $134 billion of the fund's $253 billion in AUM. And while before Gross would buy MBS and TSYs pari passu, that is no longer the case. In fact in March, Gross dumped the most Treasurys since February 2011, cutting his net exposure from 38% to 32%, and likely is in part or whole responsible for the big bond dump in the middle of March, now long forgotten (that or he merely piggybacked on the negative sentiment: April holdings will be indicative of that). Other notable shifts: Gross continues to sell European sovereign exposure, with Non-US Development holdings down to 6%, the lowest since April 2011, and surprisingly even cutting Investment Grade holdings to just 14%, the lowest since October 2008: is Gross smelling a bond bubble (in both IG and HY) and is getting out while the getting is good? Sure looks like it.

And TRF's maturity and duration distribution over time.