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Pimco's Gross: Can't Trust Spanish Bond Auctions

Tuesday, 17 Apr 2012 | 11:36 AM ET

Pimco co-founder Bill Gross told CNBC Tuesday he's steering clear of Spain's auction of two- and ten-year bonds Thursday because its" an artificially controlled market" that he doesn't trust.

Spain
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Spain

"It's basically a function of the Spanish banks," he told Squawk on the Street. "It doesn’t mean private investors such as Pimco wouldn’t buy Spanish bonds, but the bills to be offered by Spanish banks are a function of the economy."

That's why "you can’t really trust an auction in Spain" or anywhere else in Europe where the auction is "a function of what the banks are doing rather than what we are doing from the outside," according to Gross.

On Tuesday Spain's Treasury sold 2.09 billion euros of the 12-month bill, and 1.09 billion euros of the 18-month bill, which together were just above its 2-3 billion target.

Pimco CIO: Is Spain a 'Tumor' on the Euro Zone?
Bill Gross, Pimco co-CIO & founder, discusses a "tweet" he sent out earlier this week in which he expressed, in rather graphic terms, his view on the debt crisis in Spain.

As he said in a recent tweet, Gross likened Spain to a "tumor," adding, "When you get to tumor size it doesn't necessarily have to be cancerous but it can impede the function of other organs."

He said the European Central Bank has "displayed an unwillingness to continue to buy sovereign debt," particularly in Spain.

"They haven’t done that for a month. In Spain, when they had the opportunity, there was no real ECB purchases" of debt, said Gross. "The ECB is becoming more Germanic" and less southern European-focused.

Pimco recently opened an office in Rio, taking advantage of Brazil's growth. He said operations are "starting with a $10 billion base down there."

Reuters contributed to this report.

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  • A reporter and editor, Robert Frank is a leading authority on the American wealthy for CNBC.