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NEW YORK (
TheStreet) -- Bill Gross, manager of the world's largest bond fund, has exited all government-related holdings including Treasuries and moved to cash, according to a report by
The latest holdings of
Total Return Fund(PTTRX) are yet to be publicly reported. Zero Hedge did not disclose the source of its information.
"After sporting $28.6 billion in "government related" securities, TRF dropped to $0.0, while its cash holdings surged from $11.9 billion to $54.5 billion (based on total TRF holdings of $236.9 billion as of February 28)," the report noted.
If true, it might mean that Gross is predicting the end of "QE2" (quantitative easing, or Treasury purchases, by the
Federal Reserve) in June and probably does not expect further easing or QE3, from the Fed.
In his latest quarterly outlook, the high-profile bond investor said that yields could spike higher when the Fed ends QE2 in June.
According to Gross, quantitative easing has kept yields artificially low so far. He estimates that Treasury yields are perhaps 150 basis points too low when viewed in a historical context and when compared with an expected nominal GDP growth of 5%.
Once the Fed rips off the QE2 Band-Aid, bond investors will likely demand a higher yield. "Twenty-five basis point policy rates for an 'extended period of time' may not be enough to entice arbitrage Treasury buyers, nor bond fund asset allocators to re-enter a Treasury market at today's artificially low yields," Gross argued in his outlook. "Yields may have to go higher, maybe even much higher to attract buying interest."
A Pimco spokesperson could not be reached for comment at the time this article was published.
--Written by Shanthi Bharatwaj in New York
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