Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said the U.S. will retain its AAA credit rating for some time to come.
Treasurys are unattractive on a relative value basis compared to other sovereign debt and some corporate securities, Gross said today on Bloomberg Television’s “InBusiness with Margaret Brennan.” Treasury yields are about 150 basis points lower than were they normally are, he said.
Gross eliminated government-related debt from his flagship fund last month as the U.S. projected record budget deficits. Pimco’s $237 billion Total Return Fund last held zero government-related debt in January 2009. Gross had cut the holdings to 12 percent of assets in January, according to the Newport Beach, California-based company’s website. The fund’s net cash-and-equivalent position surged from 5 percent to 23 percent in February, the highest since May 2008.
Treasurys returned 5.9 percent in 2010, according to Bank of America Merrill Lynch Indexes. After slumping 2.7 percent in the fourth quarter, the securities have gained 0.1 percent so far this year.
Gross’ fund has returned 7.43 percent in the past year, beating 84 percent of its peers, according to data compiled by Bloomberg. It gained 1.86 percent over the past month.
Pimco’s U.S. government-related debt category can include conventional and inflation-linked Treasurys, agency debt, interest-rate derivatives, Treasury futures and options and bank debt backed by the Federal Deposit Insurance Corp., according to the company’s website. The fund can have a so-called negative position by using derivatives, futures or by shorting.
Derivatives are financial obligations whose value is derived from an underlying asset. Futures are agreements to buy or sell assets at a later specific price and date. Shorting is borrowing and selling an asset in anticipation of making a profit by buying it back after its price has fallen.
Pimco, a unit of the Munich-based insurer Allianz SE, managed $1.24 trillion of assets as of December.
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