Bill Gross, the co-chief investment officer at Pimco who has persistently said Treasurys are overvalued, increased the holdings of U.S. government debt in the Pimco Total Return Fund to 28% of market value last month from 15% in February, according to the company’s Web site. In January, the weighted market value of Treasurys in the fund was negative 2%.
Still, it is too early to judge whether the shift constitutes a new trend. …
…In contrast, Gross cut holdings of mortgage-backed securities last month to 65% of market value, after lifting it to 86% in February, the highest since at least 1990. January’s MBS holdings was 83%. The MBS sector has been favored by Gross, especially the high-quality securities backed by mortgage giants Fannie Mae and Freddie Mac. [1]
History teaches over and over again that it is possible to be too clever. However, perhaps just this once …
In this week’s Reuters report [2] we learned that foreign central banks continued their very low level, but increasing, selling of Agency Debt, while they bought a substantial amount of Treasury Debt, even if this week’s number was off considerably from last week’s Top 10 result. The report was, as usual, based on the weekly update from the NY Fed’s H.4.1 table site.[3] Here is Doom’s updated CSV version of the agencies and treasuries foreign central bank holdings data set.[4]
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Cenbanks bought a robust $10.883 billion of treasuries, but that was down nearly $9 billion from last week. They sold just $1.048 billion of agencies, but that was actually a bigger selloff (by only a couple of 100 million) than last week’s tiny amount. The net buy was then $9.835 billion, just a little more than half of last week’s very healthy number.
The agencies line has now been almost perfectly flat for so long that it’s getting a bit creepy.
Twist’s ratios graphs continue to drift down.
The return of divergence to Setser’s 52-week change graph actually pauses because the corresponding week last year saw a bigger treasuries rise and a bigger agencies fall than this week.
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Notes and References
[1]: "Pimco Raises US Gov Bond Holdings In Total Return Fund In March ", by Min Zeng, Dow Jones / Wall Street Journal, April 9, 2009.
[2]: "Foreign c.banks’ Treasuries holdings up – NY Fed", by Burton Frierson, Reuters, April 9, 2009.
[3]: "H.4.1 Factors Affecting Reserve Balances", Federal Reserve Statistical Release (weekly), Federal Reserve Bank of New York.
[4]: The updated data set as a Comma Separated Value (CSV) file is here.
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this looks like trouble (a twist find) …
“China Slows Purchases of U.S. and Other Bonds”, by Keith Bradsher, New York Times, April 12, 2009.