December 27, 2012

Bill Gross Bets Big on Big Apple

New York municipal debt issuance tops California for second straight year

Bill Gross (Photo: AP)Bill Gross hearts New York. The bond bigwig has more than doubled his holdings of municipal debt sold in New York, helping propel the world’s largest bond fund to its biggest investment in local securities in six years, according to Bloomberg.

The news service reports Gross’ $285 billion PIMCO Total Return Fund, boosted its New York state allocation to about a $3 billion market value in the quarter ending Sept. 30, from $1.4 billion as of June 30. It was the largest increase by amount among U.S. states.

Bloomberg data shows Gross has been buying more New York debt as municipal sales in the state are set to outpace California’s for the second straight year. It adds issuance may get a further boost as New York borrowers such as the Metropolitan Transportation Authority finance rebuilding after Hurricane Sandy.

It would be “unprecedented” for New York issuers to outsell California’s for two straight years, according to Citigroup Inc. Bloomberg notes New York debt has earned 6.1% this year, less than the 6.7% gain for the broader muni market and 8% for California, citing Barclays Plc data.

Investors like New York because its pension system is one of the nation’s healthiest, Joe Deane, head of muni investments at PIMCO in New York, told the news service.

Retirement obligations are “probably the single biggest difference in this industry from where we were 10 years ago,” Deane said.

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