Tags: Gross | Pimco | risk | Treasurys

Pimco’s Gross: ‘We’re Buying What the Fed’s Buying’

Thursday, 04 Apr 2013 08:42 AM

By Dan Weil

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Pimco is staying away from risk and purchasing Treasurys, says Bill Gross, the firm’s co-chief investment officer.

“We’re picking quality at the moment.” he tells CNBC.

“We’re buying what the Fed’s buying to avoid the complexities of risk going forward,” he says. “Pimco is investing in higher quality, highly liquid, yes, Treasurys.”

Editor's Note:
Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

Risks are rising because of the political/military crisis in North Korea and the financial crisis in Europe, Gross explains. But the most important factor behind his bullishness toward Treasurys is domestic.

“I think the reason to buy Treasurys is simply the economy itself may be slowing, and credit isn’t infusing as much enthusiasm into risk assets as it used to,” he says.

But once the Federal Reserve and mutual funds stop stocking up on Treasurys, the liquidity that has been washing through the market will dissipate if not disappear.

At that point, “investors should be concerned to own highly liquid and high-quality investments," Gross maintains.

The 10-year Treasury yield stood at 1.81 percent early Thursday. That’s up from a record low of 1.38 percent last July, but down from 6.16 percent 20 years ago.

As far as the short-term outlook for bonds, “people are starting to worry about the traditional springtime swoon in the economy,” Thomas Roth, senior Treasury trader at Mitsubishi UFJ Securities, tells Bloomberg.

And the market keenly awaits Friday’s March jobs data. “The market is now fully focused on Friday to define direction,” Tom Porcelli, chief U.S. economist at RBC Capital Markets, tells Bloomberg.

“The real question is when do you start to gain momentum? No one can deny it’s moving along.” Non-farm payrolls rose 236,000 in February.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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