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Pacific Investment Management Co.'s Bill Gross - manager of the world's biggest bond fund - has reduced his holdings of government debt and raised his cash position to its highest level since the nadir of the global economic crisis last year.

Wes Goodman and Garfield Reynolds of Bloomberg report that Mr. Gross, who manages $200-billion of assets, increased cash to 7 per cent last month from negative 7 per cent in October.

Pimco takes negative positions by using derivatives, futures or by shorting.

He reduced government-related securities to 51 per cent from a five-year high of 63 per cent in October.

The move reflects fears of rates hikes and inflation in the coming year.

The Chicago Board of Trade futures market is indicating that investors see a 41 per cent chance the U.S. Federal Reserve will raise interest rates by June 2010. That compares with just 36 per cent odds a month ago.

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