The PIMCO issue, Bill Gross departing

Posted: September 29, 2014 in Uncategorized

Bill Gross, one of the founder of PIMCO, left his position to go to Janus Capital.

What is the issue there? The issue is that Pimco is the largest bond manager (owned by Allianz)  in the world with over USD2 trillion of bonds in assets, Mr. Gross is a legend for the market and was directly overseeing USD270 Billion Dollars.

After 39 years of wins, the last two years where losing trades.

The mortgage and bond market has already an illiquidity issue.

So the largest bond deal maker is temporarily gone.

Plus in October the FED is due to exit the same market.

Wall Street Journal said, unofficially, that already USD 10 billion have been pulled from PIMCO. Now we need to see in the next two weeks if this flow become an exodus.

As they say “Houston we have a problem”.

Not all is bad.

The Fed could decide to delay is step away from the bond market (covertly or not).

Pimco could succeed in calm the market – anyway the money manager will assume the most defensive position.

As usual, in the end, another crisis in the hand of the FED – which till now did a great job against all odds.

 

——UPDATE

I found the measure that worries the most more the traders. PIMCO manages approximately 40% of all High Yield and Emerging Markets Bond issued in the world. And the liquidity of instruments is on average low (6.5% from the 1990s), but now is even lower at 4.2%

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