PIMCO has shifted to a short position in U.S. government-related debt in the world's largest bond fund, while also raising cash holdings in a sign of the asset manager's serious concerns about the U.S. fiscal outlook.
The portion of PIMCO's $236 billion Total Return Fund held in U.S. government debt, including U.S. Treasuries, was -3 percent of total assets in the fund as of March, down from zero in February, the firm's website showed.
Cash equivalents, securities with maturities of less than a year, rose to 31 percent of the fund's assets compared with 24 percent in February.
PIMCO and its outspoken co-chief investment officer Bill Gross have been raising alarm this year about who will support Treasuries once the Federal Reserve ends its bond purchase program as scheduled in June.
The Newport, California-based fund manager shed all its U.S. government-related debt holdings earlier this year and has begun to wager against the asset class.
Washington narrowly averted a government shutdown on Saturday after Democrats and Republicans agreed on cutting $38 billion in spending for the fiscal year.
The 11th hour compromise probably had little impact on the investment strategies of Gross, who said in an April newsletter that the U.S. government was out-Greeking the Greeks.
The entire U.S. yield curve has moved higher since the Fed began its second quantitative easing program in November 2010. Yields on 10-year notes have risen 80 basis points since then to 3.59 percent.
(Reporting by Kevin Plumberg)