Government bonds have been trading sideways since the middle of last year as market participants wax and wane about the prospects of the nascent economy recovery. Also, it has not quite been the one-way traffic for yields many pundits have been forecasting as seen from the US Treasury being able to sell paper across the yield curve at lower-than-expected yields.
Not subscribing to a meaningful economic recovery under his “new normal” scenario, Bill Gross, the manager of the world’s largest bond fund, last month increased the exposure of the Pimco Total Return Fund to US government debt to 35% from 31% - the first increase since October 2009. Interestingly, $409 billion from a total inflow of $507 billion into US mutual funds over the past year ended up in bond funds.
The chart below, courtesy of the latest Commitment of Traders report (via David Rosenberg, chief economist and strategist of Continue reading
