PIMCO’s Gross Increases Interest in 10-Year Treasuries (CNBC)
U.S. bond investors got a much-needed shot in the arm when their patron saint, Bill Gross, raised the allocation for U.S Treasury securities within his $289 billion PIMCO Total Return Fund. Gross upped his ante in 10-year bonds from 28 to 33 percent, while reducing his stake in mortgage bonds from 36 to 33 percent. Gross said this move was in response to the Bank of Japan’s new aggressive monetary stimulus program — which will surely force Japanese investors offshore, toward higher returns in international markets. While 10-year Treasury securities appear to offer low yields, they’re still 125 basis points more than Japanese investors can get at home. And that situation seems to be enough for him to embrace U.S. debt.
WTO Slashes Global Trade Growth Estimate for 2013 (Reuters)
The World Trade Organization (WTO) reduced its estimate for global trade growth by more than 25 percent on Wednesday, much to the chagrin of international investors. The WTO’s original estimate of 4.5 percent growth was slashed to 3.3 percent. The cut was based on two components: a remarkably small global trade growth rate for 2012 and the ongoing financial crisis in Europe. In addition, 2012’s 2 percent growth rate was the smallest annual increase in more than three decades, since 1981, when records began. But, WTO Director General Pascal Lamy also warned that 2013 even could be worse, depending upon how world events evolve through year’s end. Here’s hoping Director General Lamy is just being overly dramatic for the 24-hour news cycle.
Obama Plops Down $3.77 Trillion Budget on Congress (Bloomberg)
President Obama will deliver his 2014 budget to Congress today, all three and three-quarters trillion dollars of it. Highlights will include a reduction in Social Security and other entitlement programs, a plan to raise revenues by closing tax loopholes and limiting deductions for America’s highest earners — in large part via the Buffett rule, whereby households with an annual income over $1 million would be subject to a minimum 30 percent tax. Ultimately, this budget projects a federal deficit of $744 billion for 2014 — the first time the deficit would be less than $1 trillion since Obama took office. Unfortunately, Republican response hasn’t been positive, with Senate leader Mitch McConnell (R) of Kentucky commenting, “… sounds like the White House just tossed last year’s budget into the microwave.” Those comments are not encouraging.