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Credit Is Likely to Ease This Week: Pimco's Gross

Pressures in the credit markets are likely to ease this week as government efforts to inject capital into the banking system take hold, said Bill Gross, head of bond titan Pimco.

With the Federal Reserve and Treasury stepping in to, among other things, buy commercial paper at a 2.88 percent interest rate, current Libor rates are bound to fall, Gross said on CNBC.

Libor, or the London Interbank Offer Rate, is the amount banks charge each other to lend overnight, a pivotal rate for the industry which relies on short-term lending for capitalization. The 3-month Libor rate stood at 3.5 percent Monday morning, while overnight Libor was at 1.27 percent.

"There's no way that three-month Libor can stand at that level," Gross said. "That's going to close very quickly."

He added that the bank recapitalization is even more important than a second government program to help out people who are behind on their mortgages or whose homes are worth less than they owe on them.

That's because the reluctance of banks to lend even to each other has acted as a dam against economic growth. Once banks start to lend, the economy can begin to fend off inflationary pressures.

Yet Gross acknowledged that he was not comfortable with the government taking such a heavy hand in the free-market system.

"We're not comfortable with it, we simply recognize ... it's necessary to fill a tremendous hole in terms of delevering and liquidity in the market," he said. "It's just something we have to do."

The first $125 million in the bank recapitalization program was executed with nine major banks Sunday night and "will go out the door for those institutions early this week," David Nason, the Treasury Department's assistant secretary for financial institutions, told CNBC.

The new lending facility for the commercial paper industry begins today.

Also, the Federal Reserve on Wednesday is widely expected to cut the key federal funds rate another half point, to 1 percent, in what what many assume will be the end of its aggressive easing campaign.