Pimco’s Gross Says Greece to Default Following Downgrades
The Greek National Flag Flies in Athens
Angelos Tzortzinis/Bloomberg
A tattered Greek national flag flies from a pole outside a house in Athens.
A tattered Greek national flag flies from a pole outside a house in Athens. Photographer: Angelos Tzortzinis/Bloomberg
Jan. 12 (Bloomberg) -- Bill Gross, who runs the world's biggest bond fund at Pacific Investment Management Co., talks about the outlook for the global economy and financial markets in 2012. Gross also discusses his investment strategy and U.S. Treasuries. He speaks with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)
Jan. 16 (Bloomberg) -- Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc, discusses Standard & Poor's credit-rating downgrades of nine European nations and the outlook for a Greek default. He speaks with Owen Thomas, Linzie Janis, Linda Yueh and David Tweed on Bloomberg Television's "Countdown." (Source: Bloomberg)
Jan. 16 (Bloomberg) -- Thanos Papasavvas, head of currency management at Investec Asset Management Ltd., discusses the outlook for Greece's economy, the European sovereign-debt crisis and expectations for the euro. He speaks with Linzie Janis and Owen Thomas on Bloomberg Television's "Countdown." (Source: Bloomberg)
Pimco’s Gross Says Greece to Default Following Downgrade
Andrew Harrer/Bloomberg
Bill Gross, co-chief investment officer of Pacific Investment Management Co. (PIMCO) speaks in at a UCLA alumni event in Nov. 2011.
Bill Gross, co-chief investment officer of Pacific Investment Management Co. (PIMCO) speaks in at a UCLA alumni event in Nov. 2011. Photographer: Andrew Harrer/Bloomberg
Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said Greece is heading for default.
The downgrade of European ratings by Standard & Poor’s last week shows countries can fail to meet their debt obligations, Gross said in a Twitter posting. Greece will prove to be the latest example, Gross wrote.
Greek officials will meet with lenders on Jan. 18 after discussions stalled last week over the size of investor losses in a proposed debt swap, raising the threat of default. European officials and creditors plan a 50 percent cut in the face value of Greek debt by voluntarily exchanging outstanding bonds for new securities, though the two sides haven’t been able to agree on the coupon and maturity of the new debt.
France and Austria lost their top rankings in a series of downgrades Jan. 13 that left Germany with the euro area’s only stable AAA grade, as S&P warned that efforts to address Europe’s financial problems are falling short. The region’s leaders are struggling to tame a crisis now in its third year and convince investors they can restore budget order.
S&P cut Greece’s grade to CC in July, meaning the nation’s debt is “highly vulnerable” to nonpayment, based on the company’s rating definitions.
Pimco’s $244 billion Total Return Fund, run by Gross, increased its holdings of U.S. government debt to 30 percent of assets in December, the most in 13 months, according to the company’s website.
“The bulk of sovereign-bond holdings should be in the U.S.,” Gross wrote Jan. 4 on the Newport Beach, California, company’s website. Investors should favor Treasuries, he said, “as long as European credit implosion is possible.”
The Total Return Fund gained 4.2 percent in 2011, underperforming 69 percent of its peers, according to data compiled by Bloomberg.
To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net;
To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net
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