Bill Gross from Pacific Investment Management Co. has reduced assets of US government debt including Treasuries behind speculation of sooner than expected interest rate hikes.
In July, US debt accounted for only 45% of the holdings under the Pimco Total Return Fund, the largest bond fund with an overall value of $223 billion, compared to the 47% in June. The previous month of May, the proportion was at its largest since July 2010 at 50%. Gross, the fund manager, increased the share of non-US debt from developed economies from 16% to 17%, the highest number in nearly three years, to make up for the difference. Bonds from emerging markets under the fund were unchanged at 9%.
Holdings of mortgage debt were also reduced from June’s 22% to only 20% in July. The combination of cash equivalent securities and money market bonds went from negative 11% to negative 8% during the same period.
The Total Return Fund has had a return of 3.79% for the year so far to outperform 44% of its peers. It lagged behind 66% of its rivals in 2013 when it made investors lose by the decade worse rate of 1.9%.
The Federal Reserve has kept interest rates near zero for the past six years and is likely to maintain those levels after minimal wage growth was posted in July. Gross explained his bets on debt with shorter term maturities by saying the Fed’s hikes will not arrive too early. He claimed that, “American wages on Main Street are Janet Yellen’s No. 1 concern.”
Statistics from the Labor Department showed that there was only a slight improvement in average earnings per hour between the months of June and July when it increased from $24.44 to $24.45. It also revealed that July was the sixth consecutive month to have added more than 200,000 new jobs in the US.
Short term treasuries, which are more sensitive to changes in outlook for central bank policies, have performed weaker than their long term counterparts due to speculation that the US’ strong recovery will speed up the schedule of rate hikes. Data from contracts for futures of Fed funds indicate that there is a 70% probability interest rates will increase by at least 0.5% come September 2015.
The material has been provided by InstaForex Company – www.instaforex.com
Bill Gross from Pacific Investment Management Co. has reduced assets of US government debt including Treasuries behind speculation of sooner than expected interest rate hikes.
In July, US debt accounted for only 45% of the holdings under the Pimco Total Return Fund, the largest bond fund with an overall value of $223 billion, compared to the 47% in June. The previous month of May, the proportion was at its largest since July 2010 at 50%. Gross, the fund manager, increased the share of non-US debt from developed economies from 16% to 17%, the highest number in nearly three years, to make up for the difference. Bonds from emerging markets under the fund were unchanged at 9%.
Holdings of mortgage debt were also reduced from June’s 22% to only 20% in July. The combination of cash equivalent securities and money market bonds went from negative 11% to negative 8% during the same period.
The Total Return Fund has had a return of 3.79% for the year so far to outperform 44% of its peers. It lagged behind 66% of its rivals in 2013 when it made investors lose by the decade worse rate of 1.9%.
The Federal Reserve has kept interest rates near zero for the past six years and is likely to maintain those levels after minimal wage growth was posted in July. Gross explained his bets on debt with shorter term maturities by saying the Fed’s hikes will not arrive too early. He claimed that, “American wages on Main Street are Janet Yellen’s No. 1 concern.”
Statistics from the Labor Department showed that there was only a slight improvement in average earnings per hour between the months of June and July when it increased from $24.44 to $24.45. It also revealed that July was the sixth consecutive month to have added more than 200,000 new jobs in the US.
Short term treasuries, which are more sensitive to changes in outlook for central bank policies, have performed weaker than their long term counterparts due to speculation that the US’ strong recovery will speed up the schedule of rate hikes. Data from contracts for futures of Fed funds indicate that there is a 70% probability interest rates will increase by at least 0.5% come September 2015.
The material has been provided by InstaForex Company – www.instaforex.com
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