Bill Gross, who runs the largest bond fund at Pacific Investment Management Co., has increased his stake in foreign assets.
The fund slashed government-related holdings in December. That category consisted of Treasury securities and debt issued by the government-backed housing finance companies Fannie Mae and Freddie Mac.
According to data from Pimco’s Web site, the government-related holdings dipped to 32% of total assets, compared to 51% in November, Dow Jones reported.
Gross started leaning toward Germany’s bonds since the country is legally required to have a balanced budget by 2016, Bloomberg reported.
Gross has held the position that the U.S. dollar will continue to fall compared with its counterparts.
China, which is the largest creditor of the U.S., also reduced its stake in Treasuries in November, the Treasury Department reported.
“What many global bond managers are really thinking is that cross-border investment outside the U.S. has become a gigantic bet on the long-term declining trend in the dollar,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, wrote in an e-mail to Bloomberg.
In November, China slashed its holdings in U.S. government securities by $9.3 billion to $789.6 billion.
China could continue to lower its holdings if it believes the dollar will drop even further, said Liu Yuhui, an economist at the Chinese Academy of Social Sciences, Bloomberg reported.
Mohamed El-Erian, a co-chief investment officer at Pimco, said the US will not be able to easily move beyond weak growth of 2% a year, Bloomberg reported.
“It will take years for the U.S. economy to recover to the level of GDP attained before the crisis,” he said.
Robert MacIntosh, chief economist at Eaton Vance Management, has a more positive outlook and estimates long-term expansion at 3.75%.
“We're still Americans, and we're still going to consume,” he said.
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