Bond Funds Taking Huge Hit after Bernanke’s Speech

Bill Gross’s $285 billion Pimco Total Return Fund (PTTRX) is leading losses among the most-popular bond mutual funds after the Federal Reserve sparked a global selloff by indicating it may start reducing asset purchases.

Gross’s flagship, the world’s largest mutual fund, lost 1 percent yesterday and is down 2.2 percent for the year, the worst of 19 U.S. total return funds with at least $2 billion in assets, according to data compiled by Bloomberg. The $4.8 billion FPA New Income Fund did best this year, gaining 1 percent, one of just four funds to post gains. FPA New Income, run by Thomas Atteberry, lost 0.1 percent yesterday.

“Investors have to prepare themselves for the reality of a world in which the Fed may not be buying bonds,” Jeff Tjornehoj, an analyst with Denver-based Lipper, said in a telephone interview. “Mr. Gross has acknowledged that bonds could be in for a rough ride.”

Bonds along with stock and commodities slumped after Fed Chairman Ben Bernanke put investors on notice yesterday that the central bank is prepared to begin phasing out one of the most aggressive easing programs in its century-long history later this year. Ten-year Treasury yields climbed to a 22-month high today, worsening a selloff that started last month.

Bloomberg

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