Entering text into the input field will update the search result below

Pimco: "New neutral" explains Treasury rally

May 16, 2014 9:13 AM ETAGG, SHY, SHV, GVI, GBF, BND, BIV, BLV, BSV, BIL, GOVI, TUZ, ILTB, VGSH, SCHO, DTUL, DTUS, FWDB, SAGG, SCHZ, BOND, SPTS, GOVT, MINC, ISTB, AGND, AGZD, BYLD, SPABBy: Stephen Alpher, SA News Editor
  • Harkening back to the "new normal" thesis peddled by former colleague Mohamed El-Erian for the past few years, Bill Gross (BOND) talks of a "new neutral" to try and explain why 2.50 on the 10-year Treasury is a perfectly reasonable yield.
  • With debt remaining high and economic expansion continuing to be lame, the "new neutral" real Fed Funds rate is about 0%-0.5%, says Gross, along with Richard Clarida. "If the new neutral policy rate is 0% and the Fed achieves its 2% inflation target, than the 10-year Treasury should trade at close to 2%."
  • The investment implications: Bubble risk is lower than expected as markets have priced in a real Fed Funds rate of 1-2% and nominal of 3-4% by the end of the decade. If the "new neutral" of 0% real rates and 2% nominal plays out, asset markets could see plenty of support.
  • ETFs: AGG, BOND, BND, SHY, BSV, BIV, BLV, SCHZ, BIL, PLW, SHV, GOVT, VGSH, LAG, SCHO, BYLD, ILTB, SAGG, ISTB, SST, GBF, TUZ, GVI, DTUS, DTUL, MINC, FWDB, AGND, AGZD

Recommended For You

More Trending News

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.