PIMCO Total Return dumps U.S. government-related debt

By Jennifer Ablan

NEW YORK (Reuters) - PIMCO's Total Return Fund <PTTRX.O>, the world's biggest bond fund, has dumped all U.S. government-related securities, including Treasuries and agency debt, a source familiar with the fund's holdings said on Wednesday.

In January, Pacific Investment Management Co.'s $236.9 billion Total Return fund slashed its U.S. government-related debt holdings to the lowest level in at least two years and increased cash and debt holdings from other developed nations.

Government-related securities include Treasuries, Treasury Inflation-Protected Securities, agencies, interest rate swaps, Treasury futures and options, and corporate securities guaranteed by the U.S. Federal Deposit Insurance Corp.

The Total Return Fund's cash holdings had surged to $54.5 billion as of February 28 from $11.9 billion at the end of January. A PIMCO spokesman declined to comment for this story.

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.

In December, PIMCO said it may start investing up to 10 percent of its assets in "equity-related" securities, such as convertibles and preferred stock, after the first quarter of 2011.

(Reporting by Jennifer Ablan; Editing by Kenneth Barry)