Fund managers dump government bonds, rout continues

Investors have had to quickly get used to the recent spurt of market volatility and, with few assets offering safe haven from the rout, investors are eyeing the vulnerable bond sector for direction.

The Pimco Total Return Fund, one of the world’s largest bond funds, slashed its holdings in U.S. government debt last month, according to data published on Tuesday.

The group cut its U.S. Treasury exposure to just 8.5 percent of assets in May, just ahead of the sell-off seen in June, sharply down from the 23.4 percent levels in April.

The fund, with some $107 billion in assets, is now managed by Scott Maher, Mark Kiesel and Mihir Worah after the departure of high-profile fund manager Bill Gross in September.

U.S. government bonds are selling off — which is sending yields higher as they move inversely to price — as part of a global bond rout that was started back in April by a slump in German yields in April. Also contributing is the relatively good economic data coming out of the U.S.: Jobs numbers beat analysts’ expectations last week, upping expectations that the Federal Reserve will hike interest rates this year.

A fresh wave of selling gripped global markets on Wednesday, with yield on the 10-year German government bond yield hitting 1 percent level for the first time since September after the European Central Bank’s preferred inflation expectations gauge peaked to a 3-week high. The yield has soared from a record low close of 0.073 percent in April.


Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.