Gross Says Sovereign Debt to Resemble Corporate Returns

Bill Gross talks with Bloomberg’s Margaret Brennan about the outlook for sovereign debt and Federal Reserve monetary policy.

Again, he discusses the impending end of Fed purchases of MBS. Nobody really knows if this will end well.

Consequently, many institutional investors are avoiding MBS’s in case rates rise. However, the aversion to the asset class by institutional investors may actually cause a big spike in mortgage rates. If the impact is severe, I expect short-term volatility. However, a significant rise in mortgage rates could send the Fed back into the MBS market, but possibly via a discrete back-door.