Pimco's Gross Kept Treasury Holdings Steady

Bill Gross, manager of the world's biggest bond fund, kept the fund's Treasury bonds holdings unchanged in June even as the safe-harbor market underperformed riskier instruments amid diminished euro-zone fears.

Mr. Gross, co-chief investment officer at Pacific Investment Management Co., maintained Treasury bonds holdings at Pimco's flagship $263.4 billion Total Return Fund (PTTRX) at 35%, according to data released Wednesday afternoon on the company's website.

Meanwhile, the fund's holdings of U.S. mortgage-backed securities remained at 52% at the end of June, unchanged from May.

The fund maintaining a whopping 87% of its value in Treasury bonds and MBS signals Gross's continued worries over the euro zone's sovereign-debt crisis, even though some fund managers are repelled by the slim yields provided by the safe-haven market.

In the July investment outlook, Mr. Gross termed Treasury bonds "cleanest of the dirty shirts," providing a place for investors to hide out amid uncertainties over the euro zone's debt problems and the global growth outlook.

U.S. stocks and high-yield high risk corporate bonds beat Treasury bonds in June, but the euphoria has proved to be short-lived. So far this month, investors flocked back to Treasury bonds and the benchmark 10-year note's yield, which moves inversely to its price, has tumbled to 1.507% Wednesday afternoon from above 1.6% at the end of June.

The heavy concentration in high-quality U.S. bonds also reflected his bets that the Federal Reserve might add more stimulus for the economy. One option, a new bond-buying program on Treasury bonds and possibly MBS, could boost the value of the two markets.

So far this year, Gross's strategy has boosted returns on the fund, a strong rebound from 2011 when he was stung by ill-timed bets wagering on a price decline in Treasury bonds.

Gross's fund has given investors a return of 6.66% this year through Tuesday, beating 95% of comparable bond funds and outperforming 3.2% return on the benchmark Barclays Capital U.S. Aggregate Bond Index.

Over the past 15 years, the fund has handed investors an annualized return of 7.37%, compared to 6.24% on the benchmark index.

Pimco, part of Allianz SE (ALV.XE, ALIZF), is one of the world's biggest asset-management companies, with $1.77 trillion in assets under management.

-Write to Min Zeng at [e-mail]