Pacific Investment Management Co., better known as Pimco, ramped up its purchases of mortgage-backed securities to their highest level since 1990 in January, while decreasing its government debt holdings.

The bond giant's $136.039 billion Total Return Fund (PTTRX), the world's largest bond fund, increased its holdings of MBS to 83% last month, according to data from the company's Web site. This was up from 62% in December and 81% in November.

Second to the fund's mortgage-backed securities holdings are its holdings of investment grade corporate bonds at 18%, up slightly from 17% in December.

U.S. government debt holdings fell to minus 2%as the fund sold these holdings, after an increase of 9% last month.

Bill Gross, Pimco's manager, has said mortgage-backed securities are a good investment given the government's support for these securities.

Referring to the government's buying of these securities and another program to buy commercial paper directly from companies, Gross, in his newsletter this month, said the programs have been "the major policy successes to date."

The Fed's program has helped lower mortgage rates and "supported and increased asset prices whose decline has been the major deflationary thrust behind the real economy."

Mark Porterfield, Pimco's spokesman, didn't immediately return a call on the subject.

Pimco's Total Return Fund gained 4.81% last year, less than the 5.24% gain by the benchmark Barclays Capital U.S. Aggregate Index, according to data on the company's Web site.

Still, the fund has outperformed the benchmark over the past three-, five- and 10-year periods. In the last five years, the fund was up 5.16%, compared with the benchmark's 4.65% gain.

 
   -By Anusha Shrivastava, Dow Jones Newswires; 201-938-2371; anusha.shrivastava@dowjones.com

(Min Zeng contributed to this report)