NEW YORK (Reuters) - PIMCO's Total Return Fund, the biggest bond fund, cut U.S. government-related debt holdings in January to its lowest in at least two years and added to cash and debt from other developed nations, the money manager's website said on Monday.
Holdings in the U.S. government-related debt category, which includes U.S. Treasuries, declined to just 12 percent of the portfolio in January, from 22 percent in December, it said in its monthly update.
Bill Gross, the fund's manager who helps oversee more than $1.1 trillion as PIMCO's co-chief investment officer, has often railed against U.S. deficit spending and its inflationary impact. He has advocated buying bonds with "safe," higher yields -- such as corporate bonds -- that can withstand possible erosion of returns by inflation.
Pimco's apparent lack of confidence in U.S. government-related debt in January preceded Monday's budget presentation by President Barack Obama, who laid out plans to cut the deficit by $1.1 trillion over the next 10 years. Under the budget, the deficit would rose tp $1.645 trillion in fiscal 2011, and fall sharply to $1.101 trillion in 2012.
December's holdings of U.S. government-related debt by the PIMCO Total Return Fund were the lowest since February 2009 when the fund held 15 percent in the category. Historical figures were not available on the website on Monday.
Benchmark 10-year Treasury note yields have soared about 1.25 percentage point since October to 3.62 percent as data on the U.S. economy points to faster growth in 2011. Few signs that the Federal Reserve will begin tightening monetary policy with higher interest rates or fewer asset purchases have added to money managers' inflation worries.
The PIMCO Total Return fund has lost 0.34 percent year-to-date as of February 11, better than the 1.225 percent loss for the U.S. Treasury/Agency Master index compiled by Bank of America Merrill Lynch. The fund has gained 7 percent in the past year.
Gross in January also pared holdings of mortgage-related debt, and added "non-US developed" country debt and cash, the website showed. Investment-grade corporate debt, high-yield corporate debt, emerging market debt and municipal bond holdings were unchanged.
Editing by W Simon