Salient to Investors:

Bill Gross at Pimco said:

  • The increase in unemployment in January gives bond yields room to decline.
  • Central bank stimulus has made bond markets bubbly.
  • Avoid longer-maturity governments because of the inflation risk from quantitative easing et al.
  • As long as check writing in the trillions continues, it’s a foundation for the bond market, whether overvalued or not – the secret to the analysis is the continuation of the bubble.
  • Buy 5-yr Treasurys after several FOMC members said it would probably be appropriate to slow or stop purchases well before the end of 2013.

Mohamed El-Erian at Pimco said investors aren’t fleeing bond funds even after last month’s losses and gains by equities, and we had a very strong January in terms of inflow into bond funds – the ‘Great Rotation’ is not happening at Pimco.  El-Erian said the rotation is out of money market funds, out of bank accounts with incomplete FDIC insurance, into both equity and fixed-income markets.

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