Pimco's Bill Gross Cut U.S. Government-Bond Holdings

Bill Gross cut U.S. government-related holdings and mortgage-backed securities in the Pimco Total Return Fund in March as Treasury bond prices pulled back.

Mr. Gross allocated 41% of the fund's investments in U.S. government-related holdings at the end of March, compared with 43% at the end of February, according to data from Pacific Investment Management Co.'s website on Wednesday.

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

Mr. Gross's fund, the world's largest bond fund with $232 billion assets under management, allocated 23% of its investments in mortgage-backed securities at the end of March, compared with 29% a month earlier.

Pressure has been mounting on Mr. Gross, Pimco's co-founder and chief investment officer, following a year of record redemptions and a management shake-up. Investors are keeping a close eye on Pimco funds' performances, flows and asset allocations.

Mr. Gross's fund posted a total return of 1.3% during the first quarter of the year, trailing 85% of its peers, according to Morningstar. The fund lost 0.57% in March, deeper than a 0.17% decline by its benchmark--the Barclays U.S. Aggregate Bond Index.

The fund suffered $3.1 billion in outflows last month, the 11th straight monthly outflow, according to Morningstar.

The benchmark 10-year Treasury note posted a price loss in March as its yield rose by about 0.06 percentage point.

Mr. Gross recently argued that prices of longer-dated Treasury bonds and mortgage-backed securities may be hurt as the Fed is expected to phase out its monthly bond-buying program before the end of the year.

He has favored bonds maturing in five years or less because he argues that yields on these shorter maturities will continue to be anchored at low levels as the Fed may not start raising rates until late-2015, if not later.

In March, Mr. Gross slightly boosted some other bondholdings.

Holdings of U.S. corporate bonds, including both investment-grade debt and junk bonds, were at 10% at the end of last month, compared with 9% at the end of February.

Non-U.S. developed-country holdings, which include sovereign debt sold by euro-zone countries and the U.K. and Canada, were 10% at the end of March, compared with 9% at the end of February.

Write to Min Zeng at [e-mail]

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