BOSTON (TheStreet) -- Bill Gross, the manager of the world's biggest mutual fund, may have bet wrong on U.S. Treasuries for his fixed-income portfolio, at least in the short run.

Gross'

PIMCO Total Return Fund

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, which has a five-year average annual return of 8.5%, added significantly to its Treasuries holdings in the most recent reporting period ending June 30, raising its stake to 8% from 5%, according to Securities and Exchange Commission filings.

The fund held $243 billion in assets at the most recent reporting period and even a small change in investing strategy can move markets.

Pimco fund manager bill Gross to tip his hand at new ETF

In an interview on

CNBC

Tuesday, Gross said he expects the Federal Reserve to keep interest rates low as it copes with an economy that's likely to remain weak for "several years." He said the 8% holdings are "basically two- to three-year Treasuries" that represent "an insurance policy" given the world's current economic condition.

"You're getting nothing with a three- to six-month Treasury bill," Gross said on

CNBC

. "Rather than get nothing, we prefer to move into two- to three-year space and get 37 basis points or 65 basis points, to get something for our clients. But it's not an endorsement of Treasuries."

Making Gross' debt bet questionable is the questionable status of U.S. debt. The government reached its $14 trillion borrowing limit in May and officials have been debating whether to raise it. The Treasury Department said it will default on its debt if the limit is not raised by Aug. 2.

Moody's

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put America's credit rating under review for a possible downgrade on Thursday as talks to raise the debt limit were stalling, adding to concerns that political gridlock will lead to a default.

The benchmark 10-year note's yield, which moves inversely to its price, on Tuesday hit the lowest level since Dec. 1, according to Pimco's website on Tuesday.

Treasuries have returned 3.6% this year, according to a Bank of America Merrill Lynch index, while the 10-year Treasury yield dropped as low as 2.8% recently. The shortest-term three-month bills, yielded a paltry 0.2%, which is about what you could get if you stuffed your cash under your mattress.

Peter Cohan, a business analyst and professor at Babson College in Wellesley, Mass., says the debt-ceiling debate is much ado about nothing. "The debt-ceiling negotiations certainly boost the chatter level and Moody's threat adds to the pressure. But the question that remains unanswered is how the various political actors in this drama will use that pressure to achieve the most advantageous outcome for their side."

If the U.S. government seems likely to miss a debt payment but promises to make bondholders whole if the debt limit is raised, 10-year note yields would rise about 37 basis points, according to the average estimate of 45

JPMorgan Chase

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clients Cohan surveyed.

"The bank cites Fed research and data to conclude that a 50 basis-point yield increase would cut (gross domestic product) growth by 0.4 percentage points," Cohan says. "Based on that, a temporary suspension of interest payments would slice 0.3 percentage points off GDP growth, about the equivalent of a $6 a barrel increase in the price of oil."

Cohan says Gross' track record at Pimco "is overrated" and the fund shouldn't be used as a bellwether for fixed-income investors.

But a potential default on Treasuries isn't unprecedented. In 1979, the U.S. failed to make timely payments to its bondholders.

When asked for comment, Pimco sent a copy of a transcript of Gross' appearance on

CNBC

Tuesday. Here is the CNBC video.

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