With Friends Like PIMCO, Treasury Hardly Needs Enemies
PIMCO is taking Treasury’s money and running.
Jul 31, 2020491.5K Shares8M Views
The co-CEO of the Pacific Investment Management Company, which currently employs former TARP head Neel Kashkari— whose job it was to rescue the U.S. economy — is no longer as in love with the Treasury as he once was. Today, and despite the deepening concerns about a Europe-wide financial crisis spurred by the Greek debt crisis, Mohammad El-Erian announced that he’s far more interested in acquiring German Treasury bonds than U.S. ones. He said:
“„As we stand today, we prefer to take interest rate risk like government bonds in Germany which has much better conditions than in the United States. … When it comes to currency risk, we like to take it in places which have the strongest fundamentals. What we are focusing now on is to see where the strongest fundamentals.
As the Business Insider’s Joe Wiesenthal noted last year, PIMCO was a major secondary beneficiary of the financial market bailout, because they held a great deal of bank debt in addition to being, as Sitka Pacific’s Mike Shedlock noted, way over-invested in mortgage-backed securities — and underinvested in Treasury bonds.
But now Wall Street likes Republicans more than Democrats, Obama seemingly intends to focus on bailing out the people — mortgage holders — hurt by all the mucking around in mortgage-backed securities that PIMCO and the banks did, and the U.S. government is issuing more debt to finish fixing the financial crisis caused by the collapse in the housing market. In Germany, on the other hand, taxpayers may soon bail out a couple of countries, rather than just the banks. It’s no surprise, then, that PIMCO is getting out and heading to Germany; after all, there’s probably more money to be made in the bailout of an entire government than in just one economic sector.
Paolo Reyna
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Paolo Reyna is a writer and storyteller with a wide range of interests. He graduated from New York University with a Bachelor of Arts in Journalism and Media Studies.
Paolo enjoys writing about celebrity culture, gaming, visual arts, and events. He has a keen eye for trends in popular culture and an enthusiasm for exploring new ideas. Paolo's writing aims to inform and entertain while providing fresh perspectives on the topics that interest him most.
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