PIMCO Selling SWAP Insurance in Chinese Markets

2014 has been the year in which the derivatives strategy of the cat loving, sun-glass touting Bill Gross has been revealed to new degrees. And the hits just keep on coming as the PIMCO’s total return fund’s exposure to Chinese SWAP derivatives, cousins of the derivatives that imploded in 2008, is revealed. At the end of the first quarter, PIMCO’s flagship Total Return Fund, assumed as a relatively “conservative” bond fund in search of yield, has nearly $3 billion in insurance derivatives it sold on China’s sovereign debt, a new Reuters report revealed. PIMCO’s “short volatility” play The Chinese real…