Tags: Pimco | el-Erian | Investor | Reaction | Egypt | Signals | Danger

Pimco's El-Erian: Investor Reaction to Egypt Signals Danger for US Markets

By    |   Friday, 11 Feb 2011 11:45 AM

The fact that Egypt’s crisis isn’t sending global investors running to the dollar and Treasurys as safe havens doesn’t augur well for the U.S. financial markets, Pimco co-CEO Mohamed El-Erian tells CNBC.

Treasurys have tanked since Egypt’s unrest exploded in late January, pushing yields to 10-month highs. The 10-year Treasury yield now stands at about 3.62 percent, up from 3.38 percent Jan. 31.

Meanwhile, the dollar has remained steady, with the euro now worth about $1.3550.

In the past, global turmoil has led investors to snap up Treasurys and the dollar to keep their money safe.

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Mohamed El-Erian
"Had you asked me 19 days ago what happens to the dollar if we have the sort of developments we had, I would have told you the dollar would be stronger," El-Erian says. “You are seeing a reassessment of the standing of the U.S. dollar and the Treasury market as the flight to safety, the flight to quality."

The U.S. should consider the trend "a warning that if we don't get our house in order, we will no longer command the global standing" in currency and bond markets, he says.

But not all agree. Egypt’s turmoil doesn’t create great danger for the U.S. economy, says Abdur Chowdhury, professor of economics at Marquette University.

Despite the close political alliance between the United States and Egypt, economic ties aren’t as developed, he writes in the Milwaukee Journal Sentinel.

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The fact that Egypt s crisis isn t sending global investors running to the dollar and Treasurys as safe havens doesn t augur well for the U.S. financial markets, Pimco co-CEO Mohamed El-Erian tells CNBC. Treasurys have tanked since Egypt s unrest exploded in late January,...
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Friday, 11 Feb 2011 11:45 AM
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