World's Largest Bond Fund Has Dumped all U.S. Government-Related Securities

[sailingaway]

http://www.economicpolicyjournal.com/2011/03/worlds-largest-bond-fund-has-dumped-all.html

[amonasro]

Correct me if I'm completely off-base here... that's not good, right?

Like, not good as in very very bad.

[PermanentSleep]

Correct me if I'm completely off-base here... that's not good, right?

Like, not good as in very very bad.

I hope someone else can correct us, because I'm thinking the same thing you are.

[Zippyjuan]

They must expect interest rates on US bonds to rise. As interest rates on bonds rise, their face value goes down. If you intend to hold a bond until it matures, this really does not matter but if you buy and sell your bonds it does.

Pimco has been pessimistic on US government bonds for a while. From an intervivew a year ago (March 2010):
http://moneywatch.bnet.com/investing/article/treasury-bonds-the-pimco-outlook/408377/

Why all the worry about U.S. Treasuries?

The rating agencies are looking closely at the sharp increase in debt-to-GDP — which rose by a previously unthinkable 20 percentage points in under two years — and the outlook for persistently high deficits. In the absence of timely fiscal actions and sustainable high economic growth, debt in the U.S. could get to levels that are no longer compatible with a triple A rating. A downgrade could increase borrowing costs in the U.S., weaken growth prospects, and further undermine the country’s role at the core of the international economic system.

Does this mean interest rates will go higher and investors will see the value of their Treasuries fall?

We will see a tug-of-war in interest rates. The continuous issuance of bonds to fund high deficits, as well as concerns in the rest of the world about the stability of Treasury bonds, would argue for higher interest rates and a steepening of the yield curve. At the same time, however, the prospect of muted growth will put downward pressure on rates. The yield on the benchmark 10-year U.S. Treasury bond will bounce around between 2.75 percent to 5 percent until the end of 2011.



Based on numbers in this article http://latimesblogs.latimes.com/money_co/2011/03/pimco-bill-gross-government-bonds-treasury-debt-total-return-fund.html looks like they sold $28.5 billion in US government securities (whihc was 12% of the fund's portfolio).

[Brian4Liberty]

May be an attempt to increase the yield. No reason to invest in government bonds when the rates are so low.

[Bern]

http://www.ronpaulforums.com/showthread.php?282920-Bill-Gross-dumps-all-Treasuries

[Brian4Liberty]

They must expect interest rates on US bonds to rise. As interest rates on bonds rise, their face value goes down.

That too.

[Vessol]

Ans so the passengers run to fill the lifeboats as the great titanic known as the U.S Federal Government begins to sink.

[freshjiva]

I've been following Bill Gross' ideas and investment philosophy for some time now. I can say with 100% confidence his concerns overlap with ours in several areas.

This news is indeed a negative indication of the financial health of the US government and the current overvalued state of Treasury securities thanks to the Fed's QE program.

I'm going to read his entire Investment Outlook and write up a summary on RPF tonight.

[doodle]

Ans so the passengers run to fill the lifeboats as the great titanic known as the U.S Federal Government begins to sink.

I'm not too worried as long as God is on our side. That is why I'm torn on issue of cutting all aid to Israel as then we'll be on our own.

[TheDriver]

i'm not too worried as long as god is on our side. That is why i'm torn on issue of cutting all aid to israel as then we'll be on our own.

lmao!

[acptulsa]

I'm not too worried as long as God is on our side. That is why I'm torn on issue of cutting all aid to Israel as then we'll be on our own.

LOL.

Well, you know, there are a lot of prolifigate spenders losing their credit rating these days.

[Guitarzan]

I'm not too worried as long as God is on our side. That is why I'm torn on issue of cutting all aid to Israel as then we'll be on our own.

Rof