While liquidity from central banks and investigations by regulators may be preventing manipulation of the London interbank offered rate, the market would benefit from more transparency, according to Pacific Investment Management Co.’s Tony Crescenzi.
Barclays Plc, the U.K.’s second-largest bank by assets, was fined a record 290 million pounds ($450 million) on June 27 for rigging Libor, a global benchmark, for profit. Chairman Marcus Agius, Chief Executive Officer Robert Diamond and Chief Operating Officer Jerry Del Missier subsequently resigned.
“More transparency obviously would be better to see in fact where banks are offering money,” Crescenzi, a strategist at Newport Beach, California-based Pimco, which oversees the world’s largest bond fund, said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “It may be that there was a time when the rate could be affected, but today it’s less likely especially with the scrutiny.”
Central banks from the Federal Reserve to the Bank of China have flooded their markets with cash to support economic growth, which would likely undermine attempts to manipulate Libor rates, Crescenzi said.
“No one is bigger than the market,” he said. “The enormity of liquidity operations of the Federal Reserve, European Central Bank, Bank of England, Bank of Japan (8301), the Bank of China have gotten so great that any attempt to manipulate an interest rate has got to be futile.”
In the U.S., payrolls rose 80,000 last month after a 77,000 increase in May, Labor Department figures showed today in Washington. Economists projected a 100,000 gain, according to the median estimate in a Bloomberg News survey. The unemployment rate held at 8.2 percent.
The Treasury 10-year yield dropped five basis points, or 0.05 percentage point, to 1.54 percent at 11:34 a.m. in New York, according to Bloomberg Bond Trader prices. The 1.75 percent security due in May 2022 rose 15/32, or $4.69 per $1,000 face value, to 101 7/8.
Fed Chairman Ben S. Bernanke has indicated that more easing, potentially through buying government securities, is an option. The central bank bought $2.3 trillion of bonds in two rounds of so-called quantitative easing, or QE1 and QE2, from 2008 through 2011 to stimulate economic growth and drive down unemployment.
“The unemployment number shows listlessness in the U.S. economy still,” Crescenzi said. “It’s clearly growing too slowly to keep the unemployment rate from rising and with continued figures like this, one would expect the Federal Reserve to continue to be what it’s been, which is activist and adopt a QE3.”
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