Pimco CEO: Too Much Fed Guidance?
There's a reason markets are pricing in worst-case scenarios, and it has to do with the Federal Reserve's messaging as well as monetary policy, PIMCO CEO Mohamed El-Erian said Tuesday.
"The longer they stay unconventional, the deeper they venture with these experimental policies, the more the costs and the risks start to become large relative to the benefits," he said. "There's a second really interesting issue, which is, are they giving us too much guidance?"
On CNBC's "Fast Money," El-Erian said that oversharing had real consequences.
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"When you give so much guidance to the market, you risk over-determining," he said. "So what happens, people jump to the terminal values. They don't even wait for the journey. They go immediately to the destination, and the re-price, and then the bad technicals kick in."
El-Erian also said that he still saw value in bonds, depending on the viewpoint.
"From a value perspective, there is value in Treasuries up to about 10 years now," he said. "From a technical perspective, that's where the uncertainty is."
Because fixed-income markets started from "horrible technicals," as soon as volatility spiked, funds starting selling, El-Erian said.
"We saw complete compression in risk appetite on the Street and outflows from bond funds," he added. "So, technicals still very vulnerable, but from a value perspective, there's value here in quite a bit of the yield curve, especially in the United States."
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El-Erian also saw as good news a bit of backpedaling on behalf of the Fed.
"The reason why today good news was good news is because it came with something else," he said. "It came with indications out of China and indications out of the U.K., speaking on behalf of the Fed, that they wanted to walk back all this talk of tapering."
Trader disclosure: On June 25, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Tim Seymour is long BAC; Tim Seymour is long SBUX; Karen Finerman is long AAPL; Karen Finerman is long BAC; Karen Finerman is long C; Karen Finerman is long JPM; Karen Finerman is long TGT; Karen Finerman is long GOOG; Karen Finerman is long M; Karen Finerman is long SPY; Karen Finerman is long MDY PUTS; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long MSFT; Guy Adami is long AGU; Guy Adami is long NUE; Guy Adami is long BTU; Guy Adami's wife, Linda Snow, works at Merck; AS OF 6/18 Brian Kelly is long US dollar; Brian Kelly is long Canadian dollar.