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Bill Gross: We're buying what Fidelity is selling

Wednesday, 9 Oct 2013 | 4:25 PM ET
Pimco buying U.S. debt now: Gross
Wednesday, 9 Oct 2013 | 4:04 PM ET
Responding to news that Fidelity is selling short-term debt ahead of the looming debt ceiling, Pimco's Bill Gross says his firm is doing just the opposite.

The nation's largest manager of money market mutual funds disclosed Wednesday that it no longer holds any U.S. government debt that comes due around the time the nation could hit its borrowing limit, but the surprise announcement from Fidelity Investments failed to deter Pimco founder Bill Gross, who said his firm continues to buy debt.

"We're doing exactly the opposite actually … probably buying what Fidelity is selling," said Gross, manager of the world's largest bond fund, on "Closing Bell."

(Read more: Fidelity sellsshort-term US debt ahead of ceiling)

The difference in strategy has to do with how the two firms work, he said. In the case of a government default—even if it lasts just an hour or a day—a money market mutual fund is required to mark down its debt to zero. Pimco on the other hand, can stomach the volatility.

Gross said the odds are 1 million to one that the U.S. will not default on its debt, but that doesn't mean the threat isn't affecting markets.

"Markets basically look at the fiasco in Washington and recognize that if they can't come to some solution in terms of a budget, in terms of a debt ceiling, in terms of investment in this country ... for the next 5, 10, 15 years, then, yes, we might have a problem ... because markets are connected to the ability of an economy to grow," he said.

Separately, Gross said the nomination of Federal Reserve Vice Chair Janet Yellen to succeed Chairman Ben Bernanke means the central bank probably won't end its quantitative easing within the next year.

"So aside from the money market problem, we think it's no problem whatsoever," Gross said.

—By CNBC's Drew Sandholm. Follow him on Twitter @DrewSandholm

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