The planet's largest bond fund has gone ultra bearish on the United States, dumping all of its U.S. government-associated debt holdings. That move by Bill Gross's $236.9 billion PIMCO Total Return fund finished last month comes in the wake of a vicious Treasury market sell-off and just a few days after he questioned who will buy Treasuries as soon as the Federal Reserve puts a stop to its latest round of bond purchases in June.
Gross, who also helps oversee a $1.1 trillion investment portfolio as PIMCO's co-chief investment officer, has frequently warned against U.S. deficit paying out and its inflationary impact, which weaken the value of government debt and push up yields, as buyers demand more compensation for risk. http://silver-
Throughout the last five months, worries over the burgeoning U.S. budget gap estimated at $1.645 trillion for 2011, political standstill in Washington over how to narrow it and inflationary fears have all contributed to a steep sell-off in Treasuries. The standard 10-year note has seen its yield, which moves opposite to price, rise more than one percentage point since early October to 3.46 percent by Wednesday's close.
Gross expects further carnage. Only last week, he informed Reuters Insider that a 4.0 percent yield for 10-year notes is a "rational expectation"
Gross, as with many other investors, has brought up red flags over demand for Treasuries when the U.S. central bank finishes its controversial quantitative easing plan. This week, he posed the following in his widely read monthly report: Who will buy Treasuries when the Fed doesn't? The issue really is at what yield, and what are the price consequences if the adjustments are significant.
Already, bond prices have taken a massive beating on that chance and as the U.S. economy recovery strengthens. The 10-year Treasury yield hit a 9-1/2 month high of 3.77 percent on February 9, rising 40 basis points in the brief period from the end of January.
Gross sold all of his U.S. government-related securities, such as U.S. Treasuries and agency debt, from its flagship Total Return fund, as of the end of February 28, as outlined by the firm's website on Wednesday.
Which is down from when the stock portfolio held 12 percent federal government-related debt at the close of January. The previous time PIMCO was this unfavorable on U.S. government-related debt was in January 2009.
Gross's newest move reflects his defensive positions against higher rates and higher inflation.
Length of time is a bond's sensitivity to interest rate fluctuations, and going short duration is an investment decision strategy when rates are expected to rise. The Total Return fund features an excellent track record in timing the marketplace. It performed better than 93 percent of its intermediate investment-grade competitors over the last three years, putting up annualized returns of 8.67 percent.
Maybe now is the time for you also to consider your investment portfolio and buy gold and buy silver as a safe haven in these times of uncertainty in the political and financial areas. Silver dollar coins render a great investment that you can personally hold and keep secure. http://silver-
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