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Bill Gross hasn't just dumped his U.S. Treasury holdings, he's now short the Treasury market: 3%...

Bill Gross hasn't just dumped his U.S. Treasury holdings, he's now short the Treasury market: 3% of Pimco's $236B flagship Total Return Fund is bet against Treasurys. The fund also increased cash and equivalents to 31% from 23%, making it the largest component for the first time in four years.
Comments (6)
  • noob
    , contributor
    Comments (335) | Send Message
     
    OK... so I'm really pretty ignorant of two things in the market. Just how bonds play out (because they seem to be so manipulated it's all fakery) and how currencies interract (same reason).
    So Bill basically is dumping todays bonds with the expectation that he'll be able to pick up much higher rate/return bonds in the future?
    11 Apr 2011, 09:36 AM Reply Like
  • Power Hedge
    , contributor
    Comments (966) | Send Message
     
    He is basically betting that U.S. bonds will fall in value. It's a pretty safe bet, given interest rates. Since bonds move inversely to interest rates, he's betting that interest rates will go up.

     

    It's a pretty good bet - the only question is how long Bernanke can keep rates low. Interest rates will definitely go up, making money for Gross. The only real problem will be when he's proven right.
    11 Apr 2011, 09:42 AM Reply Like
  • kmi
    , contributor
    Comments (3979) | Send Message
     
    I'll try and add some clarity too, if I understand it right. Bonds were good investments for a long time since rates were 15%+ in the 80s and have been falling since then; and as Hedge said bonds move inverse to interest rates bonds appreciated since the 80s. But at this point the rates can't go lower, and they may move higher for an extended period, so it's a relatively safe bet - rates can't go down so you can't really lose.
    11 Apr 2011, 10:11 AM Reply Like
  • Tom Au, CFA
    , contributor
    Comments (6775) | Send Message
     
    Gross may be right, he may be wrong, but he is not in doubt.
    11 Apr 2011, 11:50 AM Reply Like
  • User 487974
    , contributor
    Comments (1105) | Send Message
     
    Not to smart Bill. If we have any kind of pullback in the markets, I would expect a fight to safety. I don't think all the money would suddenly go to Japan, The Euro etc.The dollar is under extreme pressure here, we could see a relief rally {think coiled spring} at the slightest hiccup.

     

    If we break hard to the downside, past .72, look out below. At this point that rat Bastard Bernanke will be dragged kicking and screaming, along with worthless Bill Dudley to raise our interest rates to defend the dollar. I just don't see the logic here Bill, but I am just a little guy and you are the Goliath. My year end S&P target is 589.85. I think we could easily see a move to challenge the high "two handle" in the 10 year at the lows of the market. Risk reward is skewed to the downside in risk assets, bonds just might catch a bid, but what do I know????
    Jerry
    11 Apr 2011, 03:59 PM Reply Like
  • herrmajj
    , contributor
    Comments (13) | Send Message
     
    The TBT is up 30% since September 2010. For refernce the TBT is a short bet on 20+ bonds. Could it turn? Of course, but I am glad that I wasn't on the long side. The TBT does tend to follow the overall market and therefore tends to be a derivative bullish bet on stocks. I would also draw your attention to TIP. Currently trading around 109. Value moves up with a rise in interest rates as these ar inflation protected securities. Current yield is 2.68%. Downside risk has been pretty managible with a three yeat low in the mid 90's. So S&P goes to 568 as suggested you have something to trade against. Rates go up you profit. Kinda like ridin the fence with Bill in the saddle next to ya.
    11 Apr 2011, 06:40 PM Reply Like
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