Pacific Investment Management Co. increased Treasury holdings in time to catch their swing back to gains in December, following two months of losses.

U.S. sovereign bonds returned 0.6 percent this month through Friday, after losses of about 0.4 percent each in November and October, according to a Bloomberg index. Pimco’s flagship Total Return Fund raised its allocation to U.S. government related debt to 30.8 percent as of Nov. 30, from 28.1 percent a month earlier, according to its website. It cut the proportion of high-yield bonds to 2.9 percent from 5.2 percent.

This month’s rally in Treasurys comes as stocks slide around the world and oil has slumped to a seven-year low, spurring demand for the safest assets. Treasurys surged the most in three months on Friday, even with traders expecting the Federal Reserve to raise interest rates this week for the first time in almost a decade.

“Last Friday’s rally was a genuine risk-off movement -- a flight to quality we haven’t seen for several months,” said Tomohisa Fujiki, head of interest-rate strategy for Japan at BNP Paribas SA in Tokyo. “The first rate hike is almost a done deal, but there’s more concern for the second rate hike or the third rate hike -- if the Fed really can continue its rate-hike program in 2016.”

Treasurys gave back some of last week’s gains Monday. The benchmark 10-year note yield climbed three basis points, or 0.03 percentage point, to 2.16 percent as of 6:22 a.m. New York time after dropping 10 basis points Friday. The 2.25 percent security due November 2025 fell 1/4, or $2.50 per $1,000 face amount, to 100 27/32.

Fujiki predicts the yield may swing between 2 percent and 2.40 percent during the next month as trading volumes decline toward year-end.

The reduction of the Total Return Fund’s holdings of high- yield bonds in November contrasts with a report Pimco published earlier this month.

“The outlook for the high-yield market, particularly in the U.S., has become more positive,” Andrew Jessop, a high-yield fund manager, and Anna Dragesic, head of credit product management for Europe, wrote in the report on Pimco’s website. “Any continued spread widening or market volatility should provide attractive entry points for investors.”

A Bloomberg index of high-yield debt slumped to a two-year low last week as Third Avenue Management froze withdrawals from a $788 million credit mutual fund.

Icahn’s Warning

Carl Icahn is among high-profile investors who warn of more selling ahead. “The meltdown in High Yield is just beginning,” he wrote on his verified Twitter account Friday.

There’s a 74 percent chance the Fed will raise rates by its Dec. 15-16 meeting, according to futures data compiled by Bloomberg. The calculation is based on the assumption the effective federal funds rate will average 0.375 percent after the first increase, compared with the current range of zero to 0.25 percent.