PIMCO's bond guru Bill Gross was on Yahoo Daily Ticket to share his views on QE3, inflation and economic growth going forward. He also shared his views on the 30-years government bond market and his belief that bull market in those bonds will be ending soon.
Gross said long-term interest rates have been rising in recent weeks for two principal reasons. "Yes, inflation is rearing its head. We're seeing that in oil prices and other commodities, and we're seeing it in the numbers," he said. The CPI has risen 2.9% in the past 12 months. In addition, Gross says, the Federal Reserve's "Operation Twist" is scheduled to end in a few months.
Despite the Fed's communiqué earlier this week, Gross doesn't believe the central bank's interventions in the bond markets are over. In two rounds of quantitative easing (QE), the Federal Reserve printed money to buy hundreds of billions of dollars of Treasury bonds and mortgage-backed securities. "I believe there will be a QE3, and perhaps a QE4," he said. Why? In the past few years, whenever central banks have stopped or paused their quantitative easing efforts, "stock prices have fallen and economies have slowed." The globe's private economies simply aren't sufficiently strong to support robust growth, and the world's central banks aren't willing to stand by and watch. "That's not a policy recommendation, it's simply a realization that the substitution of central bank monetary purchases will continue for a long time, as long as they [central banks] try to support private economies on a global basis," Gross said.
Here is the video:
Gross said long-term interest rates have been rising in recent weeks for two principal reasons. "Yes, inflation is rearing its head. We're seeing that in oil prices and other commodities, and we're seeing it in the numbers," he said. The CPI has risen 2.9% in the past 12 months. In addition, Gross says, the Federal Reserve's "Operation Twist" is scheduled to end in a few months.
Despite the Fed's communiqué earlier this week, Gross doesn't believe the central bank's interventions in the bond markets are over. In two rounds of quantitative easing (QE), the Federal Reserve printed money to buy hundreds of billions of dollars of Treasury bonds and mortgage-backed securities. "I believe there will be a QE3, and perhaps a QE4," he said. Why? In the past few years, whenever central banks have stopped or paused their quantitative easing efforts, "stock prices have fallen and economies have slowed." The globe's private economies simply aren't sufficiently strong to support robust growth, and the world's central banks aren't willing to stand by and watch. "That's not a policy recommendation, it's simply a realization that the substitution of central bank monetary purchases will continue for a long time, as long as they [central banks] try to support private economies on a global basis," Gross said.
Here is the video:
