Bill Gross has stripped all of its $28 billion US bond holdings out of the $236 billion Pimco Total Return, which is the world's largest investment fund.
The selling off of the US treasuries occurred over the first months of 2011 leaving the fund with a zero weighting in US government bonds. The funds cash position has now rocketed from $11.9 billion to its highest ever of $54.5 billion.
According to citywire, Gross made the decision to go down this route before the IS government makes the decision to cease its 'QE II' treasury buyback scheme, which Ben Bernanke hinted would happen on June 30th.
Bill Gross in his latest investment commentary said that QE has affected everything from interest rates to stock prices and risk spreads so that any quantitative tightening by withdrawing ' … nearly $1.5 trillion in annualized check writing may have dramatic consequences in the reverse direction'. For him the crunch question is, who will buy US Treasuries when the Fed stops buying them? 'By eliminating QE II, the Fed would be ripping a Band Aid off a partially-healed scab,' he said.
But if QE II ends and things start to look a little shaky surely the US government will just step in with QE III then QE IV then QE ad infinitum?