Pimco Says Flattening Yield Curve Is ‘the Worst Kind’

The shrinking difference between short- and long-term Treasury yields has been “the worst kind” because it is driven by a pessimistic economic outlook, according to Pacific Investment Management Co., which runs the world’s largest bond fund.

“The flattening of the yield curve has been the worst kind,” Anthony Crescenzi, a money manager at Newport Beach, California-based Pimco, wrote to clients yesterday. It occurred during “a decline in market interest rates on both ends of the yield curve. Investors have become less optimistic about the outlook for both the U.S. and global economy.”