Pimco’s Gross 'Very Worried' as Global Economy, Markets at Risk in 2012

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said the global economy and financial markets are at risk in 2012.

Pimco is “very worried,” Gross said in a Bloomberg Television interview with Trish Regan.

The $244 billion Total Return Fund run by Gross increased its holdings of U.S. government debt in December to the highest in 13 months, Pimco disclosed. The fund’s proportion of U.S. government and Treasury debt climbed to 30 percent from 23 percent in November.

“For the moment, the U.S. Treasury is viewed as a safe haven,” Gross said.

“Until we see some clear evidence in terms of where the world is going, reflation or deflation, then that’s a decent alternative. It allows you to get your money back. That’s how they are willing to pay and to accept low-interest rates as an insurance against a delevering credit event.”

Last week, Gross backed away from Pimco’s “new normal” outlook after lagging behind the majority of his peers during the biggest bond-market rally in nine years.

The period of muted growth in developed economies, high unemployment and “relatively orderly” deleveraging that Mohamed El-Erian, who shares the title of chief investment officer with Gross, coined in the aftermath of the 2008 financial crisis is morphing into a world of credit and zero-bound interest-rate risk, Gross wrote in his monthly investment commentary released Jan. 4.

Pimco has been advising investors to buy U.S. Treasurys, long-term inflation-indexed U.S. debt, “high-quality” corporates, senior bank debt and municipal securities.

The recommendations are a departure from Gross’s call last year, when he advised buying emerging-market debt and cautioned investors to stay away from the U.S., noting that growth would be higher in developing economies, while excessive borrowing would lead to inflation.