The Worlds’ Largest Bond Fund Dumps All Treasury Bonds
Mar 13, 2011
Posted by Jody Eisenman | Filed under Uncategorized
The largest bond fund in the world is called PIMCO Total Return, and is run by Bill Gross. The mammoth fund has over $230 billion in assets. Although Gross has been negative on treasuries since December, it was a bit surprising to see that the fund had dumped all US government securities, including agency debt. I guess Gross feels that the anemic return on this paper is just not worth it. Although they are sitting on over $50 billion in cash, it is believed that PIMCO is favorably inclined toward higher yielding corporate bonds and possibly convertibles, which have an equity component. There is also concern that when QE2 ends, treasury yields may jump without Fed support.
Meanwhile, the stock market completed a chaotic week. On Monday, the DJIA fell 80 points. On Tuesday, it rose 124 points on bargain hunting. The market closed little changed on Wednesday, but Thursdays’ news of a downgrade in Spain and word that the Saudis had fired on protestors send the DJIA reeling almost 230 points to close below 12,000 for the first time since January 31. Early Friday morning, the tragic news came of a massive earthquake in Japan and subsequent tsunamis. Despite this, the DJIA managed to rally back Friday to close up 58 points. All told for the week, the Dow lost 125 points, or about 1%.
The biggest fear now is the threat of a nuclear meltdown from a Japanese power plant. In the wake of the earthquake and aftershocks, radiation leaks and failures of cooling systems raised fears of a new possible catastrophe. It is also believed that over 5 million people are without power. So far, this has not reached the critical stage from the reactors, and let’s hopes it never gets there. Our prayers go out to the Japanese people over this tragedy.
