Wednesday, March 9, 2011

PIMCO Total Return dumping government bonds?

No safe haven for one's savings.

PIMCO Total Return dumps government-related debt
The world's largest bond fund dumped all of its U.S. government debt in the biggest signal yet of how negative investors have become about the U.S. Treasury market.

The move by Bill Gross's $236.9 billion PIMCO Total Return fund (NASDAQ:PTTRX - News) comes in the wake of a vicious Treasury market sell-off and just days after he questioned who will buy Treasuries once the Federal Reserve halts its latest round of bond purchases in June.

Bond prices have come under severe selling pressure because of a strengthening U.S. economy and as investors brace for what could happen when the U.S. central bank ends its controversial quantitative easing program. The 10-year Treasury yield hit a 9-1/2 month high of 3.77 percent on February 9, rising 40 basis points in the short period from the end of January.

Last week, Gross told Reuters Insider that a 4.0 percent yield for 10-year notes is a "rational expectation" if the Fed "disappears as the buyer of last resort," Gross said.

Are we looking at a stagflation catastrophe in the making? High interest rates, high unemployment, low growth, high inflation? What won't make you broke these days?

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