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August 09, 2012 at 12:12 PM
The steepening yield curve in the U.S. Treasury market should have investors worried, says PIMCO CEO Mohamed El-Erian.
While yields on government securities due in eight years and less are anchored by Federal Reserve monetary policy, bond buyers should be wary of longer-maturity debt, El-Erian, told “Bloomberg Surveillance” radio host Tom Keene on Thursday.
“What we would caution is rather than the level of the rates, the shape of the curve,” El-Erian said. “The long end is exposed to a lot more risk.”
As the news service notes, the difference in yields between two- and 10-year Treasuries widened to 1.44 percentage points, the most since May. Investors often demand a bigger yield premium on longer-maturity debt to guard against the risk that inflation will erode the value of fixed payments from the securities over time.
