PIMCO’s Bill Gross Reconsiders Bearish Position on U.S. Treasuries

(July 14, 2011) – Pacific Investment Management Co. (PIMCO) has increased its allocation of U.S. Treasury holdings in its flagship Total Return Fund run by fixed-income guru Bill Gross, according to information released on the fund’s website.

The $242.7 billion Total Return Fund increased its allocation of U.S. Treasuries from 5% to 8% at the end of June, a move that runs counter to Gross’ frequent and vehement denunciations of the asset class.

“[PIMCO has] been selling Treasuries because they have little value within the context of a $75 trillion total debt burden,” Gross said in April. He had previously said that the Total Return Fund would move to hold no government debt for the first time in over two years, and urged investors to “revolt” against U.S. Treasuries.

The Total Return Fund is still significantly underweight Treasury bonds, well below the 32.56% on the benchmark Barclays Capital Aggregate Bond Index, indicating that Gross has not overcome his bearish position on U.S. Treasuries. Still, the reversal is noteworthy considering Gross’ recent comments on the attractiveness of ex-American debt over American Treasuries.

The news comes as Moody’s Investors Service warned July 13 that it had placed the U.S. AAA bond rating under review, signaling their fear of a possible default. Congress has until August 2nd to raise the $14.3 trillion national debt ceiling, and as the deadline approaches fears of a default are heightened.