Bill Gross, who runs the world's biggest bond fund at Pacific Investment Management Co., bet against U.S. government-related debt last month and boosted cash in the Total Return Fund.
PIMCO's $236 billion fund had minus 3% of assets in government and related debt, after reducing the position to zero in February, the Newport Beach, Calif., company said on its website. Cash and equivalents rose to 31% from 23%, making it the largest component for the first time in four years.
Mr. Gross has said he is concerned about what will happen when the Federal Reserve stops buying Treasuries, after the securities fell for a second quarter. The central bank implemented a plan in November to purchase $600 billion of debt by June 30 to sustain the economic expansion.
“Their objective obviously is to improve the economy and to create jobs, but also to put a floor under the stock market, and we know that's working,” Mr. Gross said April 1 in a radio interview. “The question remains, when the Fed stops buying Treasuries, does the private sector take the baton and run the last leg of the relay race?”
Mr. Gross lowered mortgage-related debt to 28% from 34%, according to the website. Investment-grade bonds comprised 18% of the fund's holdings, unchanged from February, the figures showed.
Treasuries fell on Monday, extending a three-week decline, as economists said three government reports this week will show inflation is quickening. The securities handed investors a 2.8% loss in the six months ended March 31, according to Bank of America Merrill Lynch's Treasury Master index. The MSCI All Country World index returned 14% in the period.
Longer-maturity bonds, those most sensitive to costs in the economy, are suffering the steepest declines. They also slid as the U.S. prepared to sell $32 billion of three-year notes, $21 billion of 10-year debt and $13 billion of 30-year bonds in three daily auctions beginning Tuesday.
Ten-year Treasury yields increased two basis points to 3.6% as of 8:33 a.m. Monday in London, according to Bloomberg Bond Trader. The 3.625% note maturing in February 2021 declined 5/32s, or $1.56 per $1,000 face amount, to 100 6/32.
The Labor Department on Friday will say the cost of living index rose 0.5% last month from February and was up 2.6% from March 2010, according to a Bloomberg News survey. Core prices, which exclude volatile food and fuel, climbed 0.2% for a third month.
Labor Department figures earlier in the week will show wholesale prices and the cost of goods imported into the U.S. also climbed. So-called producer prices rose 1% in March, while import prices increased 2.2%, surveys show.
The Total Return Fund appreciated 7.3% in the past year, beating 84% of its peers, according to data compiled by Bloomberg. PIMCO is a unit of the Munich-based insurer Allianz SE.
Treasuries “have little value,” Mr. Gross wrote in his April investment outlook on the company's website.
The Total Return Fund can have a so-called negative position by using derivatives, futures or by shorting.
Government-related debt refers to sovereign bonds, Treasury Inflation Protected Securities, agency bonds, interest rate swaps, Treasury futures and options and corporate securities guaranteed by the Federal Deposit Insurance Corp., according to PIMCO.