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CNBC Transcript: CNBC Exclusive: PIMCO CIO Scott Mather Speaks with CNBC's "Street Signs" Today, Tuesday, October 14th

WHEN: Today, Tuesday, October 14th

WHERE: CNBC's "Street Signs"

Following is the unofficial transcript of a CNBC interview with PIMCO CIO Scott Mather today on CNBC's "Street Signs" (M-F, 2PM-3PM ET). Following is a link to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000318760.

All references must be sourced to CNBC.

BRIAN SULLIVAN: LET'S GET ACTIONABLE ADVICE NOW. WITH US FOR A CNBC EXCLUSIVE INTERVIEW IS SCOTT MATHER. HE IS PIMCO'S CHIEF INVESTMENT OFFICER FOR THE U.S. CORE STRATEGIES. HE IS ALSO THE NEW LEAD MANAGER OF THE PIMCO TOTAL RETURN FUND. FUND OF COURSE FORMERLY RUN BY BILL GROSS. ALRIGHT SCOTT, BEFORE WE GET INTO YOUR INVESTMENT IDEAS, QE, EUROPE, WHATEVER, MANY OF OUR VIEWERS PROBABLY OWN YOUR FUND IN THEIR 401Ks OR WHATEVER. YOU HAVE SEEN OUTFLOWS. THIS IS YOUR CHANCE. HOW DO YOU REASSURE OUR VIEWERS, YOUR INVESTORS, THAT THEIR MONEY IS IN GOOD HANDS?

SCOTT MATHER: HI BRIAN AND MANDY. WELL, CERTAINLY I THINK THAT IT IS IMPORTANT TO NOTE THAT THE PERFORMANCE OF THE TOTAL RETURN FUND HAS BEEN VERY STRONG IN THE LAST FEW WEEKS AND VERY STRONG YEAR TO DATE. WE HAVE BEEN ABLE TO MANAGE AROUND SOME OF THOSE REDEMPTIONS AND CONSTANTLY REBALANCE THE FUND TO OUR DESIRED RISK TARGETS. IT'S IMPORTANT TO KEEP IN MIND THERE THAT THE FIXED INCOME MARKETS ARE REALLY THE DEEPEST AND MOST LIQUID MARKETS IN THE WORLD IN WHICH WE OPERATE. SO THERE HAS BEEN NO PROBLEM KEEPING THE FUND ON TARGET. WE WENT INTO THIS LATEST BOND MARKET RALLY VERY WELL POSITIONED AND THAT IS THE REASON WHY PERFORMANCE HAS BEEN SO STRONG.

SULLIVAN: OK. VERY WELL POSITIONED, SCOTT. DOES THAT MEAN THAT YOU AGREE WITH 100% OF YOUR PREDECESSOR'S VIEWS AND THE FUND WILL NOT CHANGE? OR ARE YOU GOING TO TWEAK THE FUND? AND IF SO, HOW?

MATHER: WELL GOOD QUESTIONS. AND NO WE ARE NOT CHANGING THE FUND. AS YOU KNOW, IT HAS BEEN A TEAM PROCESS HERE AT PIMCO. I AND MY COLLEAGUES HAVE BEEN INVOLVED IN FORMING THOSE INVESTMENT THEMES WHICH ARE AT WORK IN THE TOTAL RETURN FUND. WE HAVE BEEN INVOLVED IN THOSE DISCUSSIONS WITH OUR INVESTMENT COMMITTEE AND THROUGH OUR CYCLICAL FORUMS WHICH WE'VE TALKED ABOUT FOR 10 TO 20 YEARS. SO NO BIG CHANGES IN TERMS OF THE BUILDING BLOCKS OF TOTAL RETURN. WE ARE CONFIDENT WE ARE GOING TO CONTINUE TO BUILD UPON THE TRACK RECORD OF SUCCESS THAT WE HAVE HAD IN TOTAL RETURN AND CONTINUE TO LOOK FOR WAYS TO ENHANCE IT AS WE BUILD OUT SOME OF OUR GLOBAL RESOURCES.

MANDY DRURY: I DON'T MEAN TO HARP ON THE TOPIC OF OUTFLOWS, BUT I JUST WANT TO PRESS YOU A LITTLE BIT FURTHER HERE, SCOTT. YOU SAID YOU ARE MANAGING AROUND THE REDEMPTIONS, BUT YOU'VE JUST HAD SOME REALLY BIG INVESTORS, RIGHT? EITHER PULL OUT OR CUT BACK. FOR EXAMPLE, THE ARKANSAS TEACHER RETIREMENT SYSTEM JUST CUTTING THEIR TIES. JUST A WEEK AFTER THE FLORIDA STATE SYSTEM REDUCED THEIR PIMCO INVESTMENTS AS WELL. HAVE YOU HEARD OF ANY OTHER POTENTIAL BIG INVESTORS WHO ARE GOING TO DO THE SAME?

MATHER: NO. AS WE STATED IN OUR PUBLIC RELEASE A BIT AGO, THE MOST INTENSE, SORT OF REDEMPTION ACTIVITY, WAS IN THE FIRST COUPLE OF DAYS OF THE ANNOUNCEMENT. AND AFTER THAT, WE HAVE SEEN A SUBSEQUENT FALLOFF IN THE REDEMPTION ACTIVITY. AND EVEN WITH THAT ACTIVITY, WAS ABSOLUTELY NO PROBLEM TO REPOSITION THE FUND FOR OUR DESIRED RISK TARGETS. AND SO THAT IS THE REASON WHEN YOU LOOK AT HOW THE FUND HAS PERFORMED IN THE PAST FEW WEEKS IT HAS BEEN STRONG. SO WE DON'T ANTICIPATE THERE WILL BE ANY BIG CHANGES FROM HERE. MOST OF OUR CLIENTS, WHEN THEY GET TO KNOW A LITTLE BIT MORE, WE ANSWERED THEIR QUESTIONS ABOUT THE CHANGES HERE. THEY ALREADY KNOW THE PROCESS. THEY ALREADY KNOW THE LEADERSHIP TEAM AND SO THEY ARE DECIDING TO STICK WITH US.

SULLIVAN: I DON'T KNOW HOW BETTER TO ASK THIS, SCOTT, THAN THIS. IS EUROPE SCREWED FINANCIALLY? AND I MEAN THAT BECAUSE I THINK IT IS NOW NINE DIFFERENT SOVEREIGNS. THE TWO YEAR SOVEREIGN IS TRADING AT A NEGATIVE REAL INTEREST RATE. WHAT IS GOING TO HAPPEN?

MATHER: WELL, WE HAVE BEEN TALKING ABOUT THAT FOR SOME TIME. WE HAVE HAD A VERY LOW GROWTH FORECAST FOR EUROPE. WE THINK IT WILL BE STRUGGLING TO MEET EVEN A 1% SORT OF GROWTH LEVEL GOING FORWARD. SO IT MEANS WE ARE GOING TO CONTINUE TO SEE THE NEED FOR MORE STIMULUS COMING FROM THE CENTRAL BANK THERE. IT PLAYS INTO SOME OF THE THEMES WE HAVE AT WORK IN THE TOTAL RETURN STRATEGY RIGHT NOW. BUT YES, A VERY CHALLENGING ENVIRONMENT. IT IS STILL THE CASE AT REAL YIELDS IN EUROPE ARE TOO HIGH AND THEY ARE TOO HIGH COMPARED TO REAL YIELDS IN THE U.S. SO WE THINK THAT YOU WILL CONTINUE TO SEE YIELDS FALL IN COUNTRIES LIKE SPAIN AND ITALY AND AROUND EUROPE AS THE ECB CONTINUES TO MOVE TOWARDS QUANTITATIVE EASING IN THE NEW YEAR AHEAD.

DRURY: I THINK IT WOULD BE FAIR TO SAY THAT A LOT OF THE VOLATILITY WE HAVE SEEN RECENTLY IS DUE TO DISAPPOINTMENT OVER LACK OF STIMULUS OR LACK OF ACTION FROM THE CENTRAL BANK OVER THERE. AT WHAT POINT DO YOU FEEL THAT THERE IS A BUYING OPPORTUNITY OVER IN THE EUROPEAN DISTRESSED PATCH?

MATHER: YEAH, WELL, WE DO THINK THAT THE ECB WILL BE COMING FORWARD WITH EVEN ADDITIONAL STEPS BESIDES THE STEPS THEY HAVE ANNOUNCED. OF COURSE, THEY'VE GOT MANY STEPS THAT WILL UNFOLD OVER THE NEXT QUARTER OR TWO. SO IN GENERAL, THAT IS A VERY SUPPORTIVE ENVIRONMENT FOR A LOT OF RISKIER ASSETS IN EUROPE. BUT IT IS IMPORTANT TO NOT LOSE SIGHT OF THE FACT EITHER THAT EUROPE HASN'T MANAGED TO OUTGROW THE DEBT PROBLEM. SO IT HAS POSTPONED. BUT CERTAINLY NOT A SET OF STRATEGIES THAT HAVE RESULTED IN THEM BEING ABLE TO OUTGROW THE PROBLEM. SO THE STRATEGIES THAT ONE SHOULD FOCUS ON THERE ARE MAINLY BASED ON THE SHORTER END OF THE YIELD CURVE. TO BET THAT THE ECB POLICIES WILL PRIMARILY ACT TO SUPPORT RISK ASSETS AND SOVEREIGN DEBT IN THE MATURITY SPECTRUM THAT'S TEN YEARS AND SHORTER.

SULLIVAN: YOU ARE A MORTGAGE GUY BY TRADE, SCOTT. LONG TIME AGO. IS THE U.S. HOUSING MARKET IN ANY KIND OF A BUBBLE? ARE MORTGAGES IN A BUBBLE?

MATHER: WE DON'T THINK SO. YOU KNOW, WHEN YOU LOOK AT OUR FORECAST IS THAT WE WILL CONTINUE TO HAVE HOUSING PRICE APPRECIATION AND WE WILL CONTINUE TO HAVE A HEALING IN TERMS OF MORE NEW HOUSING CONSTRUCTION ACTIVITY, WHICH WILL CONTRIBUTE TO GROWTH. BUT WE ARE A LONG WAY AWAY FROM HAVING WHAT WE WOULD DESCRIBE AS A HOUSING BUBBLE. SO APPRECIATION TRENDS WILL SLO, BUT THEY WILL STILL BE A MEANINGFUL HELP TO THE U.S. ECONOMY. AND THAT IS WHY WE FORECAST THAT THERE WILL BE SOME DECOUPLING GOING AHEAD. AS DISMAL AS THE WORLD GROWTH FORECAST MAY LOOK, THE U.S. HAS SHIFTED UP TO A HIGHER TRAJECTORY. WE THINK IT WILL BE SOMEWHERE BETWEEN 2.5% AND 3% ON A GOING FORWARD BASIS OVER THE NEXT YEAR.

DRURY: SCOTT MATHER, THANK YOU VERY MUCH FOR JOINING US TODAY FROM PIMCO.

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