Thursday, March 29, 2012

Bill Gross Says Fed Will Hint at QE3 in April, Likely to TWIST MBS

  • Bill Gross looking for QE3 hint from the Fed at April FOMC
  • Gross looks for the Fed to twist the MBS market
  • Gross says future QE's will be outcomes-oriented

Full Bloomberg interview below:

Gross’s thoughts on the liklihood of further QE announced by the Fed in April:

"I think Chairman Bernanke is very satisfied…I think the Fed is outcomes-oriented. They want an outcome in terms of a higher stock market, in terms of housing starts and lower unemployment. What [Bernanke] said on Monday, in terms of the employment, he suggested that up until now, we've done very well in terms of reducing unemployment but it’ll be tougher going forward if only because of structural impediments that he outlined. Going forward, he's looking at jobs, at unemployment and the housing markets. You know, future QEs will the outcome-oriented type of strategy which seeks to provide jobs and provide higher housing prices and housing starts to continue on."

Gross' thoughts on what further QE will look like:

"I have a sense that they'll continue with the Operation Twist, but not necessarily in terms of buying longer-term bonds and selling shorter dated Treasuries. I think that's basically been played out and the pension market itself in terms of liability structure has been damaged to some extent by lower 30-year yields. I think [Bernanke] will try to do is Twist in the mortgage market. Basically, buy current coupon mortgages in agency spaces and then basically Twist by repo-ing out the Treasuries that they currently own in short-term space. So, you know, a twist on another Twist I suppose, going forward."