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Pimco's Big CDS Wager

Displaced as manager of world's largest mutual fund, Pimco bets at least $10 billion on U.S. credit-default swaps.

By Mary Childs, Bloomberg | Updated on November 08, 2013

Pacific Investment Management Co. (Pimco) is wagering at least $10 billion in the credit-default swaps market that U.S. corporate bonds will gain as the Federal Reserve extends unprecedented stimulus into 2014, according to traders and investors.

The manager of the world’s biggest bond fund amassed the positions by creating swaps tied to the Markit CDX North American Investment Grade Index, which contains 125 companies from Ford Motor Co. to Staples Inc., according to five people at hedge funds and banks who asked not to be identified because they aren’t authorized to discuss the trades. Investment firms and other non-dealers held a total of $39 billion in net wagers in the index as of last week, industry data show.

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