PIMCO’s Gross: Will Yellen ‘Shape History?’

Janet Yellen, considered the frontrunner to replace Ben Bernanke as head of the Federal Reserve after Larry Summers withdrew from the process in mid-September, was officially nominated by President Barack Obama on Wednesday.

The economist, who’s been vice chairwoman of the Fed since 2010, must still win Senate approval. She led the central bank’s Communications Committee, which moved to hold regular news conferences under her direction and could add further transparency.

What are some market gurus saying and thinking about her leadership?

“Now that she’s made history how will she shape history?” PIMCO co-CIO Bill Gross tweeted. “More dovish than Bernanke but runnin’ outta ammo. Depends on [forward] guidance.”

Gross has been suggesting that investors focus on short-term Treasuries rather than longer-maturity bonds. As of late September, he’s trimmed the duration of holdings in the PIMCO Total Return Fund to 4.42 years from 5.06.

Gross spoke on Bloomberg Television on Tuesday and explained, “Anything that is anchored to the policy rate, and the policy rate being something that probably is going to be 25 basis points for at least the next several years, anything that’s anchored to that will do well and had done well.

“Perhaps 10- and 30-year Treasuries, which are subject to inflation and reflation, which is basically what this policy of Janet Yellen’s is going to attempt to do, those particular maturities are probably negatively affected,” Gross said.

The Senate Banking Committee could hold hearings on Yellen’s nomination after the debt ceiling deadline, Oct. 17.

Historian Niall Ferguson, speaking to CNBC earlier this week, said that Yellen was “theoretically on the same page as Bernanke, but covertly, she would really like to have a nominal GDP target — a new level of policy innovation on the monetary side.”