* Fed will not initiate "QE3," - Gross
* U.S. rates have no room to go much lower - Gross
* Pimco favors non-U.S. debt from Canada, Germany, Mexico
* High dividend stocks are more appealing than U.S. debt
(Adds Gross's preferred investments ideas)
CHICAGO, June 8 The Federal Reserve would not
be able to start a third round of quantitative easing after the
second round expires at the end of this month, Pimco's co-chief
investment officer Bill Gross said.
The members of the central bank's open market committee are
"balanced but divided," Gross, manager of the world's largest
bond fund, said on Wednesday in a speech at the Morningstar
fund conference. "It will be difficult to initiate a QE3."
Instead, the Fed will try to keep interest rates low with
its official statements, Gross said. The Fed has stated in each
rate decision since March 2009 that it will keep rates low for
an "extended period."
Gross's fund, the $243 billion Pimco Total Return Fund
(PTTAX.O), has gained 3.24 percent this year, trailing 58
percent of similar funds, according to Morningstar data.
The fund is underweight U.S. Treasury securities and has
shorted some related debt, Pimco has disclosed in recent
months. The bet has not paid off as the Treasury market has
"Don't go into the Treasury market because these interest
rates are so negative on a real basis," Gross said, explaining
his view that inflation would outpace the nominal yield on
Gross said he prefers non-U.S. debt issued by countries
like Germany, Mexico and Canada. "You don't have to go far
afield," he said.
Even well known U.S. stocks with dividends are more
attractive than Treasuries, Gross said. Offering examples such
as Procter & Gamble (PG.N), Johnson & Johnson (JNJ.N) and Coca
Cola (KO.N), Gross said "these are consistent and steady
(Reporting by Aaron Pressman; Editing by Steve Orlofsky and