U.S. sovereign bonds fell Friday, erasing earlier gains on news that Pimco Chief Investment Officer Bill Gross would be joining rival Janus Capital Group, which spurred concerns of investor redemptions at the world's largest bond fund manager.
Gross, a Pimco co-founder whose $222 billion Pimco Total Return Fund is the world's biggest bond fund, will manage the recently launched Janus Global Unconstrained Bond Fund and related strategies. Analysts said traders sold Treasurys on bets investors would pull cash from Pimco.
"I think people are concerned that Pimco is going to have to liquidate, so there is some pre-selling going on ahead of the fact that they may have to do some selling," said Tom di Galoma, head of rates and credit trading at ED&F Man Capital Markets in New York.
Gross's Pimco Total Return Fund had a 41 percent stake in U.S. government-related debt at the end of August, according to data on the Pimco website.
Separately, the Commerce Department raised its estimate of gross domestic product Friday to show the economy expanded at a 4.6 percent annual rate, in line with economists' expectations according to a Reuters poll.
U.S. 10-year Treasury notes were last down 3/32 in price to yield 2.52 percent, from a yield of 2.51 percent late Thursday. The yield hit a session high of 2.55 percent.
U.S. 30-year Treasury bonds rose 2/32 in price in volatile trading, bringing the yield down to 3.21 percent, off an session high if of about 3.26 percent.
U.S. five-year Treasury notes were last down 5/32 in price to yield 1.79 percent, from 1.76 percent late Thursday.