PIMCO's Gross: Fed cuts no help for housing

By Jennifer Ablan

NEW YORK (Reuters) - The Federal Reserve's aggressive interest-rate cuts have failed to push mortgage rates lower and thus have done little to help the battered U.S. housing market, said Bill Gross, chief investment officer at PIMCO, the world's largest bond fund.

The Fed's easing of its benchmark rate by 2.25 percentage points since September to the current 3 percent has not brought mortgage rates lower, with the Fannie Mae 30-year mortgage rate at 5-3/4 percent, Pimco's Gross said in a series of interviews late this week with Reuters.

"There has been no ease in the mortgage market," Gross of Pacific Investment Management Co., said in a telephone interview from his headquarters in Newport Beach, California.

Gross said the housing downturn was still in its early stages.

"If anything, there's been tightening and so to me that's the first inning as opposed to anything else," Gross said of where the economy stands in the ongoing housing crisis.

Fears of a U.S. recession have intensified as home prices remain under pressure and are not expected to stabilize until later this year and as financial credit conditions remain tight.

Already, a growing number of economists are no longer debating whether the U.S. is already in recession, but are measuring its severity.

"We are 225 basis points lower and the yield curve is reflecting 275, so that seems like a lot of ease for the markets," Gross said. "But here is the startling point -- the markets that Fed policy-makers are trying to affect haven't changed," he added.