What I do find interesting is trying to find the footprints of the impact of his departure on the bond market. The Pimco Total Return Fund has been losing billions of dollars in assets. When a mutual fund gets redemptions it must sell bonds to meet those redemption calls.
An article at marketwatch,com noted:
... the corporate bond market is obviously less liquid than the market for U.S. government debt, which makes selling corporate bonds a bit tougher. That means the prospect of Pimco being forced to sell holdings could continue to have a bigger impact on corporate debt than in other markets.
Why would Pimco sell? If investors are pulling massive amounts of money out of the company’s funds, Pimco will need to sell its holdings in order to meet those redemptions. Around $10 billion had been yanked out of Pimco in the immediate wake of Gross’s departure, The Wall Street Journal reported.
Unsurprisingly, traders and other investors are poised to take advantage of what may amount to a fire sale.
“If I’m an investor or a mutual fund or another asset manager, I think the smart move to make is to keep some cash on the sidelines, wait for the Total Return fund to face some more redemptions, than prepare to buy some of the bonds that they’re selling,” LeBas said.
In the near term, that could mean more downside for corporate bonds, wrote David Sekera, director of corporate bond strategy at Morningstar.
Two areas of the bond market that can be even less liquid than investment grade corporate bonds and US Treasury bonds are High Yield (junk) bonds and Treasury Inflation Protected (TIP) bonds.
Exchange traded funds (ETFs) are often used in the bond market by large speculators or fund managers as a means of taking positions in the bond market or hedging. A bond fund manager anticipating the need to sell bonds might first sell the relevant ETF short before liquidating the actual bonds that the fund owns. Similarly a quick way for a hedge fund or other short term trader to take a position anticipating a fall in a sector of the bond market would go short the ETF rather than shorting individual bonds.
I have no information about what PIMCO might have been doing in its bond market activity or whether hedge funds or other traders might have taken speculative positions to take advantage of anticipated bond sales by PIMCO. But I did notice some extremely large volume and large price swings in high yield and inflation protected bond ETFs. over the past week. The Gross factor in the bond market...quite possibly.
Below are 3 examples (there are similar patterns in other ETFs in these sectors of the bond market) all of these ETFs have had huge spikes in volume relative to their average and large price swings.
Addendum (october 2)
WSJ reports:
Investors withdrew a net $23.5 billion from Pimco's Total Return fund during the month, and Pimco said Wednesday that the lion's share took place Friday((September 26). That was the day Mr. Gross stunned the fund world with the announcement that he was leaving as chief investment officer and manager of the Total Return fund, which had $222 billion in assets at the end of August, to join a smaller rival, Janus Capital Group.
Addendum (october 2)
WSJ reports:
Investors withdrew a net $23.5 billion from Pimco's Total Return fund during the month, and Pimco said Wednesday that the lion's share took place Friday((September 26). That was the day Mr. Gross stunned the fund world with the announcement that he was leaving as chief investment officer and manager of the Total Return fund, which had $222 billion in assets at the end of August, to join a smaller rival, Janus Capital Group.
TIP Inflation Protected Bond ETF (average daily volume 578.833)
| Date | Open | High | Low | Close | Volume | Adj Close |
| 9/29/2014 | 112.27 | 112.34 | 112.14 | 112.19 | 3,329,800.00 | 112.19 |
| 9/26/2014 | 112.4 | 112.4 | 112.06 | 112.11 | 338,900.00 | 112.11 |
| 9/25/2014 | 112.5 | 112.72 | 112.45 | 112.69 | 672,800.00 | 112.69 |
| 9/24/2014 | 112.42 | 112.54 | 112.19 | 112.28 | 927,000.00 | 112.28 |
| 9/23/2014 | 112.13 | 112.4 | 112.1 | 112.38 | 571,300.00 | 112.38 |
| 9/22/2014 | 112.15 | 112.18 | 111.86 | 111.96 | 1,131,400.00 | 111.96 |
HYG High Yield Bond ETF (average daily volume 4,163,690)
| Date | Open | High | Low | Close | Volume | Adj Close |
| 9/29/2014 | 91.04 | 91.37 | 90.89 | 91.36 | 6,289,400.00 | 91.36 |
| 9/26/2014 | 91.22 | 91.73 | 90.95 | 91.55 | 11,842,500.00 | 91.55 |
| 9/25/2014 | 92.1 | 92.1 | 91.5 | 91.61 | 7,348,000.00 | 91.61 |
| 9/24/2014 | 92.5 | 92.5 | 92.06 | 92.24 | 6,342,700.00 | 92.24 |
| 9/23/2014 | 92.79 | 92.92 | 92.44 | 92.52 | 3,573,100.00 | 92.52 |
| 9/22/2014 | 93.16 | 93.24 | 92.91 | 92.99 | 4,355,300.00 | 92.99 |
SJNK Short Term High Yield Bond ETF (average daily volume 408.795)
| Date | Open | High | Low | Close | Volume | Adj Close |
| 9/29/2014 | 29.87 | 29.88 | 29.8 | 29.83 | 1,386,500.00 | 29.83 |
| 9/26/2014 | 29.95 | 29.99 | 29.84 | 29.96 | 3,984,200.00 | 29.96 |
| 9/25/2014 | 30.05 | 30.06 | 29.95 | 29.98 | 1,918,100.00 | 29.98 |
| 9/24/2014 | 30.12 | 30.12 | 30.05 | 30.08 | 1,155,500.00 | 30.08 |
| 9/23/2014 | 30.17 | 30.21 | 30.11 | 30.11 | 812,900.00 | 30.11 |
| 9/22/2014 | 30.23 | 30.25 | 30.17 | 30.22 | 3,033,000.00 | 30.22 |
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