Pimco's $228 billion Total Return Fund, the world's biggest bond fund, raised its market value weighting in U.S. government debt to 51 percent at the end of May from 36 percent in the previous month, data on the company's website showed on Thursday.
Bill Gross, the manager of Total Return, and Mohamed El-Erian, who shares the title of Pimco's co-chief investment officer with Gross, remained negative on Treasuries on a "long-term basis."
The dramatic move into Treasuries and government-related debt came during the most volatile month in U.S. markets. For much of May, investors were focused on potential contagion from the spiraling deficits in Greece and other parts of the euro zone.
Pimco's government allocations refer not only to nominal Treasuries, but also TIPS, agencies, interest rate swaps, Treasury futures and options as well as FDIC guaranteed corporate securities.
Pimco also cut its exposure to non-U.S. developed market debt -- corporate bonds and sovereign debt from non-U.S. developed countries -- to 6 percent at the end of May. The weighting stood at 13 percent at the end of April.
Earlier this week, El-Erian told Reuters Insider television that Pimco has been a buyer of Treasuries and government-related debt as a "short-term trade."
That's not to say the United States isn't without problems, El-Erian said, noting its huge fiscal deficits.
"At some point, when you only have dirty shirts in your closet, it's about your cleanest dirty shirt. The U.S. is your cleanest dirty shirt."
The assets and growth prospects of the United States look best compared to other parts of the world.
"On present fiscal trajectories, within three years, you could see a lot of stress on the credit rating," he said.
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