Tags: gross | mortgage | rates

Gross: Mortgage Rates Could Drop to 4.5 percent

By    |   Wednesday, 11 Feb 2009 10:25 AM

Mortgage rates could drop to 4.5 percent, says bond guru Bill Gross.

Gross is co-CEO of Pimco, the world's largest bond fund with $747 billion of assets under management.

The downward direction of rates, Gross told CNBC, could result from government's attempt to bolster the economy and light a fire under the moribund housing market.

Gross has proved remarkably prescient in many of his financial forecasts in recent years and predicted several other government moves in his interview.

Among his forecasts is that government may impose a cap on Treasury yields, which could send investors looking for better returns into riskier ventures, a move that could benefit the economy.

"I think at some point we're going to see a 4.5 percent mortgage rate and the 10-year Treasury rate capped at some level," Gross said.

The government also will soon pump additional capital into cash-poor banks, Gross predicts.

Nevertheless, on balance, Gross says the Federal Reserve has moved smartly to start resolving our economic problems.

"They've spent $2 trillion of their balance sheet and taken some risk in terms of assets," he said.

"I think they've done an excellent job so far in terms of shock and awe."

Some take issue with the bank rescues, however.

"Turning bad banks into good banks is a difficult and risky way to get them. It's simpler and safer to start entirely new banks," Paul Romer, a senior fellow at the Stanford Institute for Economic Policy Research, recently wrote in The Wall Street Journal.

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Mortgage rates could drop to 4.5 percent, says bond guru Bill Gross.Gross is co-CEO of Pimco, the world's largest bond fund with $747 billion of assets under management.The downward direction of rates, Gross told CNBC, could result from government's attempt to bolster the...
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2009-25-11
Wednesday, 11 Feb 2009 10:25 AM
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