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BOND PIMCO Active Bond Exchange Traded Fund

89.68
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Last Updated: 01:00:00
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Name Symbol Market Type
PIMCO Active Bond Exchange Traded Fund AMEX:BOND AMEX Exchange Traded Fund
  Price Change % Change Price High Price Low Price Open Price Traded Last Trade
  0.00 0.00% 89.68 0 01:00:00

Bill Gross Cuts Treasury Bonds, MBS; Adds Junk Debt

11/03/2013 8:40pm

Dow Jones News


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Bill Gross, manager of the world's biggest bond fund, cut mortgage-backed securities and Treasury bonds holdings last month while increasing holdings of junk debt.

The share of Treasury bonds in the $288.2 billion Total Return Fund (PTTRX) at Pacific Investment Management Co. was 28% at the end of February, compared with 30% in January, according to data released Monday afternoon on the company's website. The Treasury debt holdings include regular Treasury bonds and Treasury Inflation-Protected Securities.

The share of mortgage-backed securities fell to 36% in February from 37% in January and 42% in December. It was the eighth-straight month in which Mr. Gross cut MBS exposure, though these securities still account for the largest share of the fund.

In contrast, the share of junk bonds, or those rated below BBB- but carrying higher yields than Treasury bonds and investment-grade corporate bonds, ticked up to 3% from 2% in January.

In recent weeks, Mr. Gross has emphasized his investment strategy for the new year: to keep taking profit from MBS, a stance Mr. Gross revealed to the Wall Street Journal back in December. He also stays away from longer-dated Treasury bonds and buy those maturing between five and seven years.

Mr. Gross is worried the Fed's unconventional monetary stimulus via bond purchases likely will push up inflation in the coming years. In this case, longer-dated Treasurys, in particular the 30-year sector, will fall sharply in price as rising prices eat into the value of the bonds over time.

Instead, Mr. Gross has been buying shorter-dated maturities as these bonds still benefit from the Fed buying and their value is at a lower risk of getting slammed by the inflation threat.

Like many other investors worried about inflation, Mr. Gross has turned to TIPS to hedge inflation risk. The value of TIPS will be adjusted higher if consumer prices climb.

In other categories, Mr. Gross held steady holdings for investment-grade corporate bonds, municipal debt and emerging-market bonds, which were 9%, 5% and 7%, respectively, for the fund.

This year through Friday, Mr. Gross's fund broke even, faring better compared with a loss of 0.76% from the benchmark--the Barclays U.S. Aggregate Bond Index, according to data from fund tracker Morningstar Inc.

The fund has a solid longer-term track record. Its annualized return of 7.19% on average over the past 15 years beat a return of 5.84% from the benchmark.

Pimco, part of Allianz SE (ALV.XE, ALIZF, AZSEY), is one of the world's biggest asset-management companies, with about $2 trillion in assets under management.

Write to Min Zeng at min.zeng@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires


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