PIMCO, the largest bond fund in the world, bets against USD

PIMCO bets against U.S. government debt

NEW YORK (Reuters) - The world's largest bond fund began betting against the United States last month by taking short positions on its debt on expectations the nation's shaky finances will drive interest rates higher and imperil its triple-A rating.

Bill Gross, PIMCO's oft-quoted co-chief investment officer, in January warned that "mindless" U.S. deficit spending could result in higher inflation and a weaker dollar.

He has also been raising alarms about a lack of buyers for Treasuries once the Federal Reserve ends its own bond purchase program, also known as quantitative easing, in June.

The portion of PIMCO's $236 billion Total Return Fund held in long-term U.S. government debt, including U.S. Treasuries, declined to "minus 3" percent in March from zero in February and 12 percent in January, according to PIMCO's website (www.pimco.com).

"They are one of the largest investors in the Treasury market, so yes, it is significant," said Gary Pollack, a portfolio manager with Deutsche Bank Private Wealth Management in New York.

Emphasis mine.


This move follows previous draw downs in recent months. The fact is the largest private trader of US debt(and bonds in general) is betting against the USD and our ability to pay back our debts should be a clear warning to anyone that things are NOT OK. Could they be wrong? Sure, but the math isn't there to support a rosy scenario.

There are pressures on US debt from within and without, many of which I've written about in great detail. The fact that this is happening is no surprise to me at all. OPEC, by the way, has also drawn down their holdings of US debt by 9% in the bond world that's pretty big.

I've said it before and I will say it again. Buy food, buy ammo. Don't muck around with this stuff.

Very interesting indeed but your OPEC article is from 2007 - know of anything more recent?

reply to post by fenceSitter


Is it? I do have a more recent one actually..That might have been a mistake

This is the article I meant to post:
LINK

I will update the OP

Other pressures on the USD:

Japanese Emergency: Global Financial Implications and What We Should Be Talking About(Please read)

Since the 9.0 earthquake, subsequent Tsunami, and nuclear meltdown much attention has been paid to the suffering, the dying, and the dead. Much of the international media coverage has been focused on the physical damage and the developing situation at the Fukushima nuclear power complex.

I've been doing some research lately about Japan's debt loads and how this relates to the current crisis in the nation. While much of Japan's debt is contained within the nation, meaning they owe it to themselves, their debt to GDP ratio is roughly 223% of GDP(or so it will be by the end of the year). They cannot take from their own people any further, and the BOJ cannot continuously print money to inject into capital markets that have been suffering as a result of this emergency. Their plan as of late is to continue to pump liquidity into the system in a bid to inflate away their debts, but this new emergency may require that they get cash elsewhere....

Fears rise that Japan could sell off U.S. debt

Some lawmakers and market analysts are expressing rising concerns that a demand for capital by earthquake-ravaged Japan could lead it to sell off some of its huge holdings of U.S.-issued debt, leaving the federal government in an even tighter financial pinch.

Others say a major debt sell-off by Tokyo is unlikely, but noted that the mere fact that questions are being raised speaks volumes about the risks involved in relying so heavily on foreign investors to fund U.S. debt.

Of course tax cheat Timmy and his bald and bearded friend the Bernanke think everything will be ok. I'm sure to them it will be.

reply to post by projectvxn


Hmm... This has been on the cards for a while now. Just surprised it's taken until now for this to happen.

Is George Soros a major shareholder in this company? If he is then the Dollar is screwed

However, the Government could turn to the Fed Reserve and ask them to print a boat load of Dollars. Sure they charge your Government (Taxpayers) for the privilege, but it may hold it back.

Wouldn't it be beneficial to De-Value anyway, thereby reducing your debts to China and India?

reply to post by Cobaltic1978


I don't think he holds stock in PIMCO. If anything he's a direct buyer of US debt. He doesn't need PIMCO.

But I'm willing to bet he watches them rather closely.

Devaluing to pay off debts has been tried many times before. The outcome is always disastrous.

Here's some more of that pressure:
U.S. Treasuries 'Ponzi scheme': ex-PBOC official-(People's Bank of China-via MarketWatch)

HONG KONG (MarketWatch) -- A former adviser to China's central bank said on Monday that China should have retreated from the U.S. government-bond market and instead allowed the yuan to appreciate more freely, warning that U.S. sovereign debt was akin to a giant Ponzi scheme, according to a newswire report that cited an editorial on Caixin Media Group's website. Yu Yongding, a former member of the People's Bank of China monetary-policy committee and now a member of a state-run policy group, said allowing appreciation of the yuan against the U.S. dollar under a free-floating currency regime would have reduced China's need to acquire U.S. Treasuries.

I've been saying for some time that the Chinese would rather cut their losses than continue to see their investment devalued by Washington profligacy and the Fed's irresponsible money printing and debt monetization scheme.

Gold £2000 and silver £80 by the end of the summer.

Gold £4000 and silver £500 by end of 2012 as hyperinflation kills you all!

I guess we'll find out how serious both parties are about cutting spending within the next month or so.

Obama supposed to make a speech to the nation about national debt on Wednesday.

Congress/Senate MUST vote to raise the national debt limit before May 16th. This fight is gonna look like Vimy Ridge compared to the schoolyard battle the was the budget cut debate.

reply to post by babybunnies


My guess is Congress is going to be busy fighting it out while the market says "no more" and rightfully starts feeding us our profligacy right back down our throats. Why? Because it's better to cut your losses and take a small haircut than it is to lose your shirt.

Both houses, are not that serous about cutting spending. There are only a very very small handful that are serous about doing something, and a handful doesn't cut it in either house.

reply to post by dwmjr1985


Agreed.

Everyone in congress has skin in the game and cutting spending exposes new layers very fast...It'll be very painful for them politically if they start cutting.

We're F'd because individual members of congress are more concerned with their jobs and bottom lines than doing what is right.

this isn't really huge news....it was big when they dropped treasury's but this isn't that huge IMO.

pimpco is freakeda about what happens when qe 2 runs out on june 30....there could be a period of asset price deflation should it be apparent there won't be a seamless or obvious transition from qe 2 to 3.

this is the most interesting fed move regarding how they deal with qe 2 running out and how they wait or not to continue futher easing and their justification..

It is a big deal that PIMCO dumped all their treasuries. When QE2 runs out in June, the Treasury will have to somehow find buyers for the debt they want to issue. The Fed has been buying up to $100 billion a month for the last 6 months. Buyers that do come in are going to bid lower for the treasuries, thus the interest rate will go up on them. That means our interest payments will be going up on our national debt.

It appears that there's a perfect storm brewing. Just this week, the IMF came out and said that private institutions, i.e. banks and other similar facilities need to refinance $3.6 Trillion in debt over the next 2 years and this does NOT include the financing needed by the individual central banks of all the countries. Also, BRICS (Brazil, Russia, India, China, and South Africa) met recently and all agreed that they would start trading with each other in their own currencies and NOT use the dollar. Japan sure isn't going to be in a position to buy our debt anymore. They will probably need to sell some of their holdings to finance their humongous rebuilding effort.

I think we're down to the short strokes on trying to keep our head above water on our debt. Only time will tell, but it doesn't look good to me.

things haven't looked good for 3 years but these guys are experts at kickin the can.

they will continue with qe 3 when qe 2 ends. gross is talking his BOOK now that he is out of treasury's.

if market tanks and commodity's tank next couple weeks w/ dollar rally that gives the fed more wiggle room to initiate qe 3 more seamlessly on the heels of june 30. if it is not a seamless transaction the markets will pull a wylie coyote and when the qe support is pulled out july 1.....they will tank until it its reinitiated or unless their is clarity that it will be reinitiatetd at the first sign of market weakness.

I would imagine that Bill Goss's influence probably had an effect on the S&P putting the US Treasury bonds on negative watch today. The man has a bunch of power. Must be nice to have the market react to your moves rather than the other way around. Thats the problem when indivuals get control of too much money. They make their own destiny.

yes dollar downgraded and it rises 1% today....i n t e r e s t i ng.


the fed needs qe 3 to save banking system. the fed could really use falling commodity prices as qe 3 is discussed over the april 28 weekend. falling commodity prices and a rising dollar go hand in hand.

seems like the fed's pomo today was leveraged to the hilt to go long on the dollar....and chop commodity's down.

but who knows it's like reading tea leaves....that is why when the details of the april 28 fed meeting are releasted everyone wants to know what's up with qe 3 and when and how large.

reply to post by cpdaman


You can gain temporary percentages when the Fed uses primary dealers as the hub for their debt monetization scheme.

Print(digitize). Print(digitize).

boom!