Pimco Reduces Holdings of U.S. Government-Related Debt

By Min Zeng 

Bill Gross cut U.S. government-related debt holdings at the Pimco Total Return Fund in August while slightly raising exposure to corporate bonds.

The move came as the U.S. bond market rallied broadly last month. The yield on the benchmark 10-year Treaasury note fell to the lowest level since June 2013, which encouraged investors to buy higher-yielding, but riskier fixed-income assets such as corporate bonds. Bond yields fall as prices rise.

U.S. government-related holdings accounted for 41% of the $221.6 billion bond fund at the end of last month, compared with 45% at the end of July and 47% at the end of June, according to data on Pacific Investment Management Co.'s website Wednesday afternoon.

The holdings include Treasury bonds, Treasury inflation-protected securities, Treasury futures and derivatives linked to the U.S. government debt securities.

The Pimco fund, the world's largest bond fund by assets, allocated 13% of its investments in U.S. corporate bonds, including both investment-grade debt and bonds sold by lower-rated firms, or junk bonds. That compared with 12% at the end of July.

The fund's holdings of mortgage-backed securities was 20%, unchanged from the end of July.

Mr. Gross is co-founder and chief investment officer at Pimco, which manages $1.97 trillion in global assets as part of Germany's Allianz SE.

Treasury bonds posted a total return--reflecting price changes and interest payments--of 1.06% in August, but the return was outpaced by 1.59% from junk bonds, according to Barclays PLC.

Write to Min Zeng at [e-mail]

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