Bill Gross is continuing to slash PIMCO Total Return Fund’s exposure to U.S. Treasury bonds as yields linger near all-time lows.
Gross cut holdings of Treasuries in March to 32%, the lowest since December and down from 37% the previous month, Bloomberg News reports.
The bond guru oversees the roughly $250 billion mutual fund and its offshoot, PIMCO Total Return ETF (NYSEArca: BOND), which has gathered about $372 million since listing March 1.
The new ETF outperformed its bond benchmark in the first month of trading thanks in part to Gross overweighting the fund in mortgages. [Performance Scorecard: Bill Gross’s PIMCO Total Return ETF]
Gross has been warning investors in recent months that inflation is a threat to Treasury holders since yields are so depressed. Also, the Federal Reserve has been supporting the Treasury market by buying long-term bonds in an effort to keep rates low and stimulate the economy. [PIMCO’s Gross Favors Shorter Duration, Inflation-Protected Bonds]
Yields on the 10-year Treasury note dipped back below 2% earlier this week on renewed concerns over the Eurozone debt crisis and weak U.S. jobs data.
In March, Gross boosted mortgage investments to 53% of PIMCO Total Return Fund, signaling his expectation the Fed will add these securities in a new round of stimulus, Ignites.com reports. In a recent interview, Gross said the central bank could announce further support for the mortgage market rather than trying to drive down Treasury rates.
PIMCO Total Return ETF is up 1.4% for the trailing month, compared with a 0.3% gain for the Barclays Capital US Aggregate Bond Index, according to Morningstar.
