El-Erian: We're Still Stuck in Second Gear

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Sept. 6 (Bloomberg) -- Pimco CEO and Co-Chief Investment Officer Mohamed El-Erian discusses the U.S. economy with Betty Liu on Bloomberg Television's "In The Loop." (Source: Bloomberg)

There is a tremendous amount of economic and technical crosscurrents.

Don't get too greedy in these markets, for sure.

Pimco might be surprised at the level of yields we are seeing in treasuries.

Alex, you have been watching movement in the bond market.

I have.

We were seeing the yield come off a bit yesterday.

We have seen it hit 2, 2 .5 , now we are seeing the same pattern around 3. he expects a pushback to three and a quarter on the 10-year.

Mohamed , are you surprised we are even here at the yield levels, given your new normal scenario?


it is an artificial level to begin with.

We have always said, be careful, markets are artificially priced, especially where markets -- markets where the fed has been applying its unconventional policies.

The market is telling you that we are seeing significant changes in asset preferences.

Some of them are the retail or.

-- sector.

Look at what is happened to emerging markets.

They have been using their reserves, so they invest less in u.s. treasuries.

Investors should be cautious of these crosscurrents.

The economy is telling you one thing, technicals are complicating the matter.

That is before we talk about syria.

You have been cautious about what is going on in europe or it actually has been looking at how the european markets have been trading -- europe.

Julie has been looking at how the european markets have been trading.

The euro stoxx 50 is the benchmark for the region.

The 40% recovery we have seen, and the depths of the concerns about a fiscal crisis and potential breakup of the region at that point.

He you can look at italian bonds.

Yields have stabilized at this point.

If you look at the euro itself, not reflecting that concern about a breakup anymore.

We have seen stabilization in the year, to say the least.

If you look at correlation between the euro and other types of risk assets, particularly in emerging markets, you're seeing a lot of money flow from the emerging market into the eurozone and into the euro itself as the economy stabilizes.

Mohamed, are investors in europe too optimistic about the recovery?

Everything that has just been said is correct.

The question we analyze in our investment committee and with our european colleagues is, are the reasons behind this permanent, or are they temporary and reversible?

We get a sense that this summer of tranquility in europe has been used to quite a few factors that are temporary, including postponing every difficult decision beyond the election.

This text has been automatically generated. It may not be 100% accurate.


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