Salient to Investors:

Bill Gross at Pimco said:

  • Treasuries gained this week for the wrong reason – speculation economic growth will slow as the Fed reduces its stimulus efforts, when instead yields, certainly in the mortgage market, and the Treasury market might rise as well.
  • The Fed will buys bonds through 2013 and says investors should buy Treasury 5-yr maturities and avoid longer-term bonds.
  • The Pimco Total Return Fund raised holdings of Treasuries to 30 percent in January from 26 percent in December.
  • Central bank efforts to spur growth will boost costs in the economy, and inflation may rise to 3 percent over the next few years.

Chungkeun Oh at Industrial Bank of Korea said economic growth is slow enough to send yields lower and bought Treasuries earlier this month when the 10-yr yield was 2.05 percent.

Financial companies expect 10-yr yields to fall to 1.9 percent by March 31 and then rise to 2.32 percent by year-end.

Economists expect GDP growth in Q4 2012 to be revised up to 0.5 percent from a 0.1 percent contraction.

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