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Bill Gross Is Off Government Bonds, Purchases $45 Billion in Derivatives

Bill Gross

Pimco Fund Manager, Bill Gross is not waiting for the Federal Reserve to raise interest rates; In August, his fund lightened up on government bonds and purchased $45 billion of futures. It is thought he has his eye on purchasing Brazilian, Spanish and Italian debt.

Pimco thinks interest rates will remain lower in the U.S, even after quantitative easing is eased, than they were before the crisis, creating a “new neutral” with growth at a slower pace. Pimco had a return of only 3.3%, coming in behind 57% of its peers. Gross’ fund is one of the world’s largest, with $293 billion assets. However, many clients defected when the Fed said it would gradually phase out its bond buying program starting May 2013. Bill Gross said he is changing requirements for his Total Return fund to allow broader investment in derivatives. One of his strategies is to replace government bond with corporate debt that can yield 30 to 40 basis points more than Treasuries.

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