*Bill Gross raises Treasuries exposure by 60 pct in June
*He says won't buy Treasuries without recession risk
*PIMCO Total Return Fund's cash down to 29 pct from 35 pct
(Adds QE3 forecast and fund's cash position)
By Jennifer Ablan
NEW YORK, July 12 Bill Gross, the manager of
the world's largest bond fund, has soured further on the U.S
economic outlook and has jacked up buying of U.S. Treasuries
in June, according to PIMCO's website on Tuesday.
Gross' $243 billion Total Return Fund (PTTRX.O) held 8.0
percent in U.S. Treasuries and Treasury-related securities as
of the end of June 30, up from 5.0 percent as of the end of
May -- a 60 percent increase.
The "Government Treasury" classification in Gross'
flagship fund includes holdings of U.S. Treasury notes, bonds,
futures and inflation-protected securities, Pacific Investment
Management Co said.
Gross, who also helps oversee $1.2 trillion in assets as
co-chief investment officer at PIMCO, told Reuters in early
May that the only way he would purchase Treasuries in a big
way again is if the United States headed into another
U.S. job growth ground to a near halt in June as employers
hired the fewest workers in nine months, frustrating hopes the
United States would bounce back quickly from a slowdown in the
first half of the year.
FOLLOW THE FALLING YIELDS
In the May interview, Gross had said: "Treasury yields are
currently yielding substantially less than historical averages
when compared with inflation. Perhaps the only justification
for a further rally would be weak economic growth or a future
recession that substantially lowered inflation and
Against the backdrop of the recent employment report as
well as the spiraling European debt crisis, the yield on the
benchmark 10-year Treasury note US10YT=RR fell to 2.91
percent on Tuesday, down 1.4 basis points from late Monday. It
touched 2.82 percent in overseas trading earlier on Tuesday,
which was the lowest level since early December.
PIMCO's representatives said they do not comment on
Gross also recently tweeted that the Federal Reserve would
hint at a third round of bond purchases, or QE3, at the
Jackson Hole meeting in August. In that regard, he said the
front end of the U.S. Treasury yield curve represents the best
value on a duration-adjusted basis. For story, click on
Gross' bearishness on the United States was also evident
in the Total Return fund's increase in non-U.S. debt.
Gross increased the portfolio's stake in non-U.S. debt in
June for a second consecutive month to 13 percent from 10
percent. Meanwhile, cash and cash equivalents dropped in June
to 29 percent from 35 percent.
As of June 30, Gross' Total Return Fund held a negative
9.0 percent short position in the newly created investment
category referred to as swaps and "liquid rates," which
includes U.S.-dollar-denominated interest-rate swaps,
swaptions, options and other derivatives. That position was
unchanged from May.
Gross made headlines earlier this year and came under
heavy criticism when it appeared he had ramped up a "short"
position in U.S. Treasuries, given the furious rally in the
But in May, it was revealed that PIMCO had been short
swaps. Swaps are an agreement between two parties to receive a
fixed rate of interest and pay a floating rate (three-month
(Reporting by Jennifer Ablan; Editing by Jan Paschal)