Monday, June 8, 2009

“Rate hikes will be some time in coming,”

TO BE NOTED: From Bloomberg:

"Pimco Says ‘Rate Hikes Will Be Some Time in Coming’ (Update1)

By Wes Goodman

June 9 (Bloomberg) -- Pacific Investment Management Co., which runs the world’s biggest bond fund, said the economic outlook “looks bad” for most of the world and central banks will refrain from raising interest rates.

“Rate hikes will be some time in coming,” Andrew Balls, a managing director for the company in London, wrote in a report on the company’s Web site.

Euro zone debt markets are a “more attractive place” to add duration because of “weaker growth,” according to the report, which focused on the firm’s outlook for Europe. Duration is a measure of a portfolio’s sensitivity to changes in yield, and a larger figure indicates a more bullish position.

Pimco favors shorter maturities in the U.K., Balls wrote. The Bank of England “will be on hold at very low interest rates,” the report said. Short-term debt tends to track what central banks do with interest rates, while longer maturities are more influenced by the outlook for inflation.

“In the near term we see strong cyclical disinflationary pressures, with inflation already very low in the euro zone and moving downward in the U.K.,” the report said. Disinflation is a slowing of inflation.

Bill Gross, co-chief investment officer of Newport Beach, California-based Pimco, manages the $156.9 billion Pimco Total Return Fund. Pimco is a unit of Munich-based Allianz SE.

To contact the reporter on this story: Wes Goodman in Singapore at"

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