Pimco Total Return Fund more than doubles U.S. government-related holdings

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NEW YORK Pimco more than doubled its holdings of U.S. government-related debt in its flagship Pimco Total Return Fund (PTTRX.O) in June from the prior month, the firm reported on its website on Friday, as it looks for the Federal Reserve to hike interest rates slowly.

Pacific Investment Management Co, which is known as Pimco and is a unit of Germany's Allianz SE (ALVG.DE), said the Pimco Total Return Fund increased its holdings in U.S. government-related securities to 19.6 percent in June, up from 8.5 percent in May.

The $102.8 billion Pimco flagship fund had its largest position in mortgages, which accounted for 36.8 percent of holdings as of June 30 up from 34.6 percent in May, according to the firm's posting on its website.

U.S. government-related holdings may include nominal Treasuries and inflation-protected Treasuries, Treasury futures and options, agencies, FDIC-guaranteed and government-guaranteed corporate securities, and interest rate swaps.

While Pimco's holdings in U.S.

"government-related securities to 19.6 percent in June, up from 8.5 percent in May.The $102.8 billion Pimco flagship fund had its largest position in mortgages, which accounted for 36.8 percent of holdings as of June 30 up from 34.6 percent in May, according to the firm's posting on its website"government-related debt increased significantly, its holdings in short-duration instruments dropped dramatically.

The Pimco Total Return Fund had 1.65 percent in short-duration instruments in June, down from 17.8 percent in May.

Short-duration instruments include securities and other instruments with an effective duration less than one year and rated investment grade or higher. They are commingled liquidity funds, uninvested cash, interest receivables, net unsettled trades, broker money, short duration derivatives (for example Eurodollar futures) and derivatives offsets.

The Pimco Total Return Fund increased its holdings in emerging markets to 21.6 percent of assets in June, compared with 19.1 percent in May, according to Pimco's website. In credit, the fund had an 8.84 percent allocation to investment-grade debt in June, up from 8.2 percent allocation in May, and 3.22 percent in high yield "junk" bonds in June, down from 3.3 percent in high yield the previous month.

A Pimco spokeswoman declined to comment.

(This story has been refiled to delete extraneous words in last paragraph)

(Reporting by Jennifer Ablan; Editing by Lisa Shumaker and Diane Craft)