By Jennifer Ablan and Richard Leong
NEW YORK, March 26 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
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.