Funds News

UPDATE 1-Gross says PIMCO buying CMBS securities - CNBC

(Adds details of CMBS market, quotes)

NEW YORK, Feb 28 (Reuters) - Pacific Investment Management Co. (PIMCO) is buying a few highly rated commercial mortgage-backed securities even as some are calling it the next problem market, its chief investment officer Bill Gross said on Thursday.

“Most of these structures we are buying are AAA-rated,” the manager of the world’s largest bond fund said on CNBC television, adding that the investments are “well protected and they are yielding 250 basis points over Libor.”

He said he recognizes “the talk on TV that the commercial real estate market is the next problem market.

The commercial real estate market has faltered this year with the yield spread premium on the triple-A rated CMBX-4 index of commercial mortgage-backed securities soared to a record high this month of 228 basis points over interest-rate swap rates, according to JPMorgan Chase & Co.

But the spread has subsequently eased below 200 points in recent days on signs that some investors see CMBS as undervalued, analysts said.

Gross’s comments follow a similar sentiment on the CMBS market expressed by Scott Amero, global chief investment officer for fixed-income at New York money management firm BlackRock earlier in the week, who told reporters there is “unbelievable value” in triple-A-rated commercial mortgage-backed securities. (Reporting by Chris Sanders and John Parry; editing by Gary Crosse)