UPDATE 1-PIMCO's Gross sees Fed QE3 hints in April-Twitter

Mon Mar 26, 2012 10:26am EDT

By Jennifer Ablan and Richard Leong

NEW YORK, March 26 (Reuters) - Bill Gross, who runs the world's biggest bond fund at PIMCO, said the U.S. Federal Reserve will likely hint at a third round of bond purchases, better known as "quantitative easing," at its April policy meeting.

Gross issued his view on Fed policy on social media platform Twitter on Sunday. "#Fed likely to hint @ QE3 in April meeting," said Gross, co-chief investment officer at PIMCO.

It wasn't Gross's first time tweeting on QE3.

In June, Gross said the Fed would signal a third round of bond purchases in a bid to boost sluggish economic growth at the closely watched Jackson Hole annual global central banking conference, led by the Fed, which takes place in Wyoming.

Gross, who oversees the $252 billion PIMCO Total Return Fund , is betting big on the Fed.

Gross increased the Total Return Fund's exposure to mortgage-backed securities (MBS) to 52 percent in February from 50 percent in January. In October, the fund's exposure to MBS was just 38 percent.

Gross has been steadily plowing into MBS on the expectation that the Fed would announce a new round of mortgage bond buying. But with the Fed's latest decision, it appears a new round of mortgage bond buying is on hold, or least delayed.

On March 12, Gross said the U.S. central bank "must keep buying bonds that the market doesn't want."

That statement was made prior to the last Federal Open Market Committee (FOMC) meeting on March 13, when policymakers modestly upgraded their outlook on the U.S. economy.

The recent FOMC statement partly fueled the biggest weekly selloff in Treasuries since last summer, which some analysts saw as the start of a prolonged bear market for bonds.

Ben Bernanke, chairman of the Fed, on Monday suggested the central bank would continue supportive monetary policies even as the unemployment rate improves.

"The continued weakness in aggregate demand is likely the predominant factor. Consequently, the Federal Reserve's accommodative monetary policies, by providing support for demand and for the recovery, should help, over time, to reduce long-term unemployment as well," he said. [ID : nL2E8EQ1UH]

Even so, the yield on the benchmark 10-year note rose to 2.27 percent on Monday from 2.24 percent last Friday and 1.79 percent at the end of January.