Pimco’s Gross Is Buying Treasuries Amid Deflation Concern

Sept. 29 (Bloomberg) -- Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said he’s been buying longer maturity Treasuries in recent weeks amid a re-emergence of deflation concern.

“We’ve exchanged our mortgages for the government’s check” as the Federal Reserve winds down purchases of agency debt, Gross said in an interview from Newport Beach, California, with Bloomberg Radio.

Gross boosted the $177.5 billion Total Return Fund’s investment in government-related bonds to 44 percent of assets, the most since August 2004, from 25 percent in July, according data released earlier this month on Pimco’s Web site. The fund cut mortgage debt to 38 percent from 47 percent.

The Total Return Fund handed investors a 17.85 percent gain in the past year, beating 94 percent of its peers, according to data compiled by Bloomberg. The one-month return is 1.94 percent, outpacing 57 percent of its competitors. Pimco, based in Newport Beach is a unit of Munich-based insurer Allianz SE.

Officials at Pimco have forecast a “new normal” in the global economy that will include heightened government regulation, lower consumption and slower growth. The economy will likely expand at a 2 percent to 3 percent rate going forward, Gross said.

The world’s largest economy shrank at a 1.2 percent annual rate from April to June, more than the originally reported 1 percent contraction, according to a Bloomberg News survey before the Commerce Department’s Sept. 30 report. The jobless rate climbed to 9.8 percent this month, from 9.7 percent in August, according to a separate Bloomberg survey before the Labor Department reports figures on Oct. 2.