PIMCO, the world’s top bond fund manager, has gained about $50m (£31.1m) on an inflation-related trade that resulted in losses to the trade’s counterparty Morgan Stanley.
Pimco, which was concerned about a pick-up in longer-term inflation, began buying 30-year Treasury Inflation Protected Securities, or TIPS, people familiar with the matter said.
Morgan Stanley is thought to have had opposing views on long-term inflation and had bet against the 30-year TIPS.
As Pimco’s bet began to pay off, Morgan Stanley suffered tens of millions of dollars in losses on the opposite end of the trade.
TIPS help protect investors from inflation by rising in value as inflation increases.
Pimco declined to comment.