The largest bond fund on the planet is betting the Congress does not have what it takes to solve the nation’s deficit problem. Government debt is anathema for the moment at the Pimco Total Return Fund, as evidenced by its short position on United States Treasuries. Post resource – Pimco moves market with short position on U.S. government debt by MoneyBlogNewz.
The U.S. Treasuries and the Pimco changes
The Nation’s triple-A bond rating might be endangered and Pimco is betting on the debt problem driving up rates of interest. Pimco sold securities with the idea that they could purchase them back at a much lower price. Pimco head Bill Gross has been warning investors about the risks of United States government debt. In February Gross brought on a stir by selling all of Pimco’s Treasury holdings. In March he made $7 billion bet against the securities. There was a drop from zero to negative three in the $236 billion Return Fund held in the United States Treasury of Pimco. The fund’s cash equivalents rose to 31 percent of the fund’s assets, a $73 billion bet that the good times are about to end in the markets.
Behind Pimco’s short position
Gross has little faith that Congress will be able to help solve the deficit problem. The government is “out of Greeking the Greeks,” according to Pimco’s April newsletter. Essentially, Greece had to ask the European Union for money to bail them out of their financial problems, and the United States is probably not far off. In fact, current unfunded government spending on entitlements results in five times United States GDP, a debt burden much heavier than what sent Greece into crisis.
How the market will impact Pimco
Gross is assuming a sort position on United States Treasuries and hoping that the market falls in his favor. CNBC’s John Carney does caution investors when it comes to following Gross’ methods. The term that is used is “dangerously wrong,” when defining the shifts Wall Street has viewed as ‘correct’ in the past few years.
Christian Science Monitor