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PIMCO’s Gross Sees Lower Short-Term Rates, Higher Long-Term Rates

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More wisdom from Bill Gross in 140 characters. The chairman of bond behemoth PIMCO tweeted Monday that reflation is under way and long-term bond yields will be higher than short-term rates in the U.S. and “Euroland.”

Bill Gross, co-CIO, PIMCO (Photo: AP)“Bond investors—yield curves 2 be very steep in US&Euroland 4 a very long time,” Gross (left) tweeted. “Reflation underway. Low short rates; higher long rates.”

Reflation is the act of encouraging economic growth through stimulus measures or tax cuts following a contraction in the business cycle.

“When central banks write checks, credit and equity markets feast at the trough,” Gross admonished in an earlier weekend tweet. “Don’t be a PIG though—yields are too low.”

Earlier this month in his outlook for September, the head of the world’s largest bond shop employed the Lindy dance craze, former Citigroup CEO Chuck Prince, the Wimpy cartoon character and his “dying cult of equity” argument in a mash-up of prose to describe the “age of inflation that is upon us,” which he claims typically “provides a headwind, not a tailwind, to securities prices in both stocks and bonds.”

“Credit, of course, is what makes the global economy go …Wimpy said it best, ‘I’ll gladly pay you Tuesday for a hamburger today,’” Gross wrote. “So McDonald’s grew from a million to 500 billion served and Wimpy and his wimpalikes were delighted in the exchange, although their arteries and midsections inevitably came out a loser … But in order to promote and indeed foster continuing symbiosis, both borrower and lender need to operate in a nutrient-rich environment, a “credit” petri dish of sorts which fosters strong bones and healthy lenders and borrowers in their adult years. That unfortunately does not seem to be the case.”


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