PIMCO gains $50 mln, Morgan Stanley loses on an inflation trade-WSJ

BANGALORE, July 5 Tue Jul 5, 2011 10:09am IST

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BANGALORE, July 5 (Reuters) - PIMCO, the world's top bond fund manager, gained about $50 million on an inflation-related trade that resulted in losses to the trade's counterparty Morgan Stanley , the Wall Street Journal reported, citing people familiar with the matter.

PIMCO, which was concerned about rising long-term inflation, began buying 30-year Treasury Inflation Protected Securities, or TIPS, the people told the paper.

Morgan Stanley had an opposing view on long-term inflation and had bet against the 30-year TIPS, the Journal said, citing traders.

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, according to the WSJ.

TIPS help protect investors from inflation by rising in value as inflation increases.

Even though PIMCO, a unit of German insurer Allianz , made money from its trade over several months, other complex moves at the same time likely affected the bond firm's overall profits, a person told the Journal.

A spokesman for PIMCO declined to comment on details of the trade to the Journal. Both PIMCO and Morgan Stanley were not available for comment when contacted by Reuters outside regular U.S. business hours. (Reporting by Sakthi Prasad; Editing by Muralikumar Anantharaman)

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