A 'Tremor just went through, the Force' - World's biggest bond fund sells US bond holdings

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John99's picture
John99
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A 'Tremor just went through, the Force' - World's biggest bond fund sells US bond holdings

Exclusive: Bill Gross Dumps All Treasuries, Brings Total "Government Related" Holdings To Zero, Flees To Cash - No QE3?

Tyler Durden's picture

Submitted by Tyler Durden on 03/09/2011 09:02 -0500


And many thought Bill Gross was only posturing when he said he is getting the hell out of dodge. Based on still to be publicly reported data by Pimco's flagship Total Return Fund, the world's largest bond fund, in the month of January, has taken its bond holdings to zero (and -14% on a Duration Weighted Exposure basis). The offset, not surprisingly, is cash. After sporting $28.6 billion in "government related" securities, TRF dropped to $0.0, while its cash holdings surged from $11.9 billion to a whopping $54.5 billion (based on total TRF holdings of $236.9 billion as of February 28). This is the most cash the flagship fund has ever held, and the lowest amount in Treasury holdings since January 2009 before it was made clear that the Fed was going to adjust QE1 to include Treasurys in addition to Mortgage Backed Securities. PIMCO's Treasury holdings peaked in June 2010 at $147.4 billion and have declined consistently ever since. And while we expected that the spike in MBS holdings (at times on margin) was indicative of an expectation that QE3 would monetize mortgage backed securities, the ongoing decline in that asset class now leads us to believe that Bill Gross is now convinced there will be no QE3 at all, at least based on his just putting his money where his monthly pen is! And if Bill Gross, the most connected person to the upcoming actions by the Fed, believes there is no more quantitative easing, it is really time to get the hell out of dodge in all security classes - bonds, and most certainly, equities.

Note the plunge in Treasury holdings in the chart below (blue line), offset by the surge in cash (dotted pink line). Time to panic.

And when it comes to duration adjusted holdings, something wierd is going on: PIMCO has increased its holdings of securities with a 0-1 duration to 14%, quite possibly the highest ever, and certainly the most to where our records go back. The effective duration on the entire portfolio dropped to 3.89, the lowest since December 2008.

Source:

http://www.zerohedge.com/article/exclusive-bill-gross-dumps-all-treasuri...

m111ark's picture
m111ark
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So, who's going to buy those

So, who's going to buy those T-bonds when the Fed stops buying?  At these artificially high prices?  Conventional thinking would be that it's time to buy TBT, however, conventional thinking hasn't worked for two years.  Hmmm, what could cause bond yields to fall once QE II ends?

John99's picture
John99
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This could play into Chris's
This could play into Chris's senario, 'The Coming Rout', very nicely!  (http://www.peakprosperity.com/blog/coming-rout/53869)
docmims's picture
docmims
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Say hello to 10 percent bank

Say hello to 10 percent bank CDs and 12 percent inflation.  Brings back that 70s feeling.

DmaxSilver's picture
DmaxSilver
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Crazy

I can't believe the FED would allow this to happen, I mean it's a 180 degre change in direction and would cause a huge polictial, economic, financial, social, ETC in our face problem! It would be '37 all over again, but 10x worse!  Now if any one one or more of these events happen; Europe impodes, China crashes, Oil 150+ because MENA blows up.

I'm thinking the FED is just prepping/testing markets and building a case for more QE or something else?????

Thoughts? 

John99's picture
John99
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Being a teeny-tiny

Being a teeny-tiny pessimistic, I think the end-game is to leave all financial assets (programs) pillaged and plundered leaving only US Treasuries in the investment portfolios. Treasuries being what? A promise that the tax-payer will pay. So when all is said and done we end up with bankrupt tax payers unable to pay their own entitlements. Seems like a well-planned robbery to me.

And then, either war, or the only other choice, a one-world fiat currency.

docmims's picture
docmims
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This is the end of the

This is the end of the current ponzi scheme.  From the ashes will rise a newer and betterer scheme with the same old puppet masters in charge of the new currency.  Only this time it will be better.  Drink your koolaid and move on please.

m111ark's picture
m111ark
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So, TBT down .75 today. 

So, TBT down .75 today.  Somebody lookin' to be a contrarian.

John99's picture
John99
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Fed picks up the 'bid' till

Fed picks up the 'bid' till all the friends get out. Last one out, turn off the lights, please.

Johnny Oxygen's picture
Johnny Oxygen
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Say hello to 10 percent bank

Say hello to 10 percent bank CDs and 12 percent inflation.  Brings back that 70s feeling.

Yep Docmims.

Remember 20+ % CD's?
Johnny Oxygen's picture
Johnny Oxygen
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Posts: 1443
Bill Gross is now convinced

Bill Gross is now convinced there will be no QE3 at all, at least based on his just putting his money where his monthly pen is! And if Bill Gross, the most connected person to the upcoming actions by the Fed, believes there is no more quantitative easing, it is really time to get the hell out of dodge in all security classes - bonds, and most certainly, equities.

I wonder if this will be the trigger to collapse the bond market?

I wonder if the Fed wants to collapse the bond market?

Wendy S. Delmater's picture
Wendy S. Delmater
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I wonder that anyone thought

I wonder that anyone thought the new House members would actually pass QE 3 and that it took this long to realize they probably would not.

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grandefille
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QE3 and Congress

@ Safewrite: Actually, QE policy is determined by the Federal Reserve, which sets monetary policy.  Congress can only indirectly influence the actions of the Fed, by doing things like "grilling" officials when they testify before Congressional comittees.  Congress votes on fiscal policy issues, like cutting/raising taxes and spending.  At times, the two efforts can reinforce each other (ex. if Congress votes for large deficeit spending and the Fed. engages in QE "money printing" ) and at other times the two efforts can work in opposition.

 

Julie

John99's picture
John99
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Here is an excellent article

Here is an excellent article from Mike Krieger. This guy is impressive!

Dow and gold heading for 1:1 http://www.zerohedge.com/article/mike-krieger-why-2011-not-2008-why-it-much-worse-and-dow-gold-parity

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