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Gold Price Trend Forecast Summer 2019

PIMCO's Bill Gross Bets On Deflation and U.S. Treasury Bonds

Interest-Rates / Deflation Sep 30, 2009 - 03:39 AM GMT

By: Mike_Shedlock

Interest-Rates

PIMCO's Bill Gross has a switch of heart. He has gone from hating treasuries to liking them. Please consider Pimco’s Gross Buys Treasuries Amid Deflation Concern.


Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said he’s been buying longer maturity Treasuries in recent weeks as protection against deflation.

“There has been significant flattening on the long end of the curve,” Gross said in an interview from Newport Beach, California, with Bloomberg Radio. “This reflects the re- emergence of deflationary fears. The U.S. is at the center of de-levering as opposed to accelerating growth.”

Gross had said during the midst of the credit crunch that Treasuries offered little value as investors seeking a refuge from turmoil in global financial markets drove yields to record lows in December. He boosted the $177.5 billion Total Return Fund’s investment in government-related bonds to 44 percent of assets, the most since August 2004, from 25 percent in July, according data released earlier this month on Pimco’s Web site. The fund cut mortgage debt to 38 percent from 47 percent.

 

Yield Curve Flattening


I am very familiar with the yield curve flattening. The above chart is one I run constantly, in real time, on my computer. The curve represents weekly closes. The flattening from the actual peak is even greater. The intraday high in the 10-Year Treasury Note is just over 4%.

What's The CPI?

Properly adjusted for housing, I have the real CPI as of July at -6.2%. That number is arrived at by substituting the Case-Shiller CPI for Owners Equivalent Rent (OER) in the CPI. Please see What's the Real CPI? for details.

Inquiring minds might also be interested in Real Treasury Yields Highest In History. If real treasury yields are high, it should be no wonder that Bill Gross in interested in them.

Rents Falling Everywhere

Given that the official measure of CPI is based on rents not housing prices, please consider the following collection of links courtesy of Lanser on Real Estate: Really? Rents fall almost everywhere.

Look for downward pressure on the official CPI because of falling rents.

As I have said before, the treasury market is increasingly skeptical of the reflation effort taking hold. Bill Gross is clearly in agreement.

By Mike "Mish" Shedlock

http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2009 Mike Shedlock, All Rights Reserved

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© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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