Summit News

Pimco buying FDIC-backed debt, senior bank debt

NEW YORK (Reuters) - Mohamed El-Erian, co-chief of the powerful money manager Pacific Investment Management Co, on Wednesday said his firm has been buying bonds backed by the Federal Deposit Insurance Corp and senior debt of banks, at a time of near-zero yields on short-term U.S. Treasuries.

Speaking at the Reuters Investment Outlook Summit in New York, El-Erian said Pimco has been finding better return potential on securities that carry the same high credit ratings as ultra-safe government debt, but said it remains premature to buy high-yield debt or U.S. equities.

He also said Treasury inflation-protected securities, or TIPs, look attractive at current levels.

On Tuesday, the government sold four-week Treasuries that carried a zero yield, and some Treasury bills briefly carried negative yields. El-Erian said that “ultimately, these levels will look silly, but right now they are consistent with the realities of today’s world.”

Reporting by Jonathan Stempel; Editing by Leslie Adler