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Bill Gross tells clients to drop dollar exposure on debt deal
by David Campbell on Aug 02, 2011 at 14:22
Just weeks after heavily ramping exposure to treasuries, Bill Gross said that the deal on the US debt limit will make no difference to the long-term sustainability of the country’s deficit.
‘Nothing in the Congressional compromise reached over the weekend makes a significant dent in our $1.5 trillion deficit, wrote Gross.
Gross, manager of the world’s biggest bond fund, PIMCO’s $243 billion Total Return fund , upped his investment in US sovereigns from 5% to 8%, primarily in short duration maturities.
‘Front-end of US yield curve represents best value on a duration adjusted basis,’ Gross posted on twitter at the time. He had been criticised for missing a sustained rally in US debt this year.
Gross now appears to have reconsidered his position, saying that clients should cut dollar exposure in favour of emerging market currencies, favour higher yield overseas debt, and buy real assets.
‘Above all, don’t be lulled to sleep by Congressional law makers that promise a change in Washington,’ wrote Gross in his monthly update, issued earlier today.
‘In addition to an existing nearly $10 trillion of outstanding Treasury debt, the U.S. has a near-unfathomable $66 trillion of future liabilities at “net present cost”.’
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Aberdeen Live supplement: Fundamentals point to ongoing flows and solid returns from EMD
After a record year for inflows and market-leading performance in 2012, emerging market debt has taken a large step towards the mainstream. Our recent debate covers the outlook for the asset class this year and where opportunities can be found.