Fed Fails to Restore Creditor Confidence, Pimco Says

[Purveyor]

Source: Bloomberg News

Oct. 2 (Bloomberg) -- As far as the world's biggest bond investors are concerned, the Federal Reserve is failing to restore confidence in the U.S. credit markets.

Pacific Investment Management Co., TIAA-CREF and Insight Investment Management say the central bank's decision to lower the overnight lending rate between banks by half a percentage point last month won't prevent the economy from slowing or corporate defaults from increasing. Lehman Brothers Holdings Inc. strategists say last month's rally in high-yield corporate bonds, the biggest since 2003, may fizzle by year-end.

While indexes of derivatives that measure the risk of default show increasing investor confidence, the difference between the interest that banks and the U.S. government pay for three-month loans is wider now than a month ago. That's a sign the Fed's Sept. 18 rate decision has yet to persuade bondholders that lower borrowing costs will stop ``disruptions in financial markets'' from hurting the economy.

``The reality is the fundamentals haven't gotten any better, and, if anything, they've gotten worse,'' said Mark Kiesel, an executive vice president at Newport Beach, California-based Pimco who oversees $85 billion in corporate bonds.

About three-quarters of 30 fund managers who oversee $1.25 trillion expect a hedge fund or credit market blowup in the ``near future,'' according to a survey by Jersey City, New Jersey-based research firm Ried, Thunberg & Co. dated Oct. 1.



Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=ad4W7q15.lds&refer=worldwide

[CountAllVotes]

1. awwwwwwww

bunch of damned crooks!

:nopity:

[Viva_La_Revolution]

2. what exactly do they mean by "blowup"?

:shrug: