Pimco California Municipal Bond Fund will buy debt of the most populous state and have an average duration ranging from seven years to 12 years, according to a May 21 regulatory filing. Pimco National Intermediate Municipal Bond Fund will invest mostly in tax-exempt bonds from state and local governments and have an average duration from three years to nine years, the firm said in a separate May 21 prospectus. Duration is a measure of sensitivity to changes in interest rates.

Joe Deane, head of municipal investments in New York, will run the funds for Pimco. The Newport Beach, California-based firm oversees $55 billion of municipal investments and manages 23 municipal funds, including the two that begin trading Thursday.

“We don’t want to be just a supermarket where you have absolutely everything,” Deane said in a telephone interview. “We want to pinpoint areas in the marketplace that we think represent value, have a large investor base in them, and where we think we can bring something to the table both in terms of research and money management skills.”

Natural Extension

The California fund was a “natural extension” for Pimco because it’s based there and lacked a fund dedicated to longer-term bonds in the state, said Deane, who joined the money manager in July from Legg Mason Inc.’s Western Asset Management unit. His experience managing another national intermediate fund before coming to Pimco showed that type of fund is likely to lure assets, he said.

Municipal-bond mutual funds attracted about $13 billion this year through May 30, the best annual start since 2009, according to data from Lipper US Fund Flows. The funds have added assets for seven straight weeks.

Essential service revenue bonds rated A to AA will form the core of Pimco’s new funds, along with those it already manages, Deane said. The securities selected will probably be “higher grade and not too far out on the yield curve,” he said.

California Governor Jerry Brown cut general-obligation-debt sales to $11.5 billion in 2011 and 2012, the smallest two-year total since 2006, as the state seeks to close its budget deficit. There will still be more than enough assets for the fund to buy, Deane said.

Pimco California Municipal Bond will trade under the symbol PCTIX and have a management fee of 44 basis points for institutional shares. The symbol for Pimco National Intermediate Municipal Bond is PMNIX and the fund will charge 45 basis points. A basis point is 0.01 percentage point.

The benchmarks for the funds are the Barclays Capital California Municipal Bond Index and the Barclays Capital Municipal Bond 1-20 Year Blend (1-22) Index. Both funds will start with seed money of $3 million, Deane said.