Home > Main > Was the bond selloff entirely due to Pimco selling at least $100bn of Treasuries??

Was the bond selloff entirely due to Pimco selling at least $100bn of Treasuries??

February 16, 2011

Bill Gross runs the largest bond funds in the world.  His flagship fund has $250bn of bonds in the fund.  In September, 51% of the fund was in Treasuries.  By the end of December, only 22% of the fund was in bonds. Today, only 12% of the fund is in bonds.

This is a sale of about $100bn in bonds over that time.  In the first three months, the fund sold about $75bn of bonds.  This is a gigantic flow of bonds by any measure.

But this $250bn fund is only a fraction of the entire Pimco fixed income allocation. Pimco manages over $1,300bn as of the end of 2010.  Pimco says the “bulk” of the money is devoted to fixed income investing.  “Bulk” to me means 80% or more – which given $1.3tn in total funds, would be 1,040bn allocated to fixed income investing.   Wow.

We don’t know the entire amount of Treasuries that Pimco sold in total, but if they sold in their other funds with the same intensity, Pimco divested their funds of at least $200bn in Treasuries, and perhaps as much as $400bn!   That is as much as 2/3rds of the size of QEII!  And much of this selling had to happen before the buying in QEII even began.

We do not know when Gross started selling bonds. Nor do we know if any of his other bond funds also sold treasuries.   But we do know there are no other $1.3 Trillion funds who are willing and able to dramatically change their allocations over the course of  a few weeks.

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