Talking Numbers

Pimco: Forget taper, watch this

Talking Numbers

Tony Crescenzi, Executive Vice President, Market Strategist, and portfolio manager at Pimco, discusses today's Fed meeting and what investors should be aware of.

Today’s the day: the world will find out if – and by how much – the Federal Reserve Bank will taper its $85 billion per month bond-buying program known as “quantitative easing” (“QE”). And, we talk numbers with a portfolio manager at the world’s largest bond fund to find out what we should expect this afternoon.

Of course, word of any tapering won’t come as a surprise. The market has been getting ready for it since May. That was when Chairman Ben Bernanke told the US Congress that the Fed would consider tapering (the media’s term, not his) the QE program should economic data improve. For the past several years, the Fed has been buying US Treasury and mortgage bonds to add dollars into the financial system and simultaneously lower interest rates.

(Watch: Fed taper? Might as well be tightening, Wien says)

As bond prices move up, bond yields go down, and all that bond-buying from the Fed brought the yield on the US Treasury’s 10-Year Note to record lows. It was only since December that QE went up to $85 billion but when Bernanke suggested a future tapering back in May, yields on the US Treasury 10-Year Note went from about 1.6% to 3.0% in a matter of four months. Many analysts believe that Federal Open Market Committee (FOMC) – the Fed group responsible for the bond purchases – will announce it tapered QE by $15 billion this afternoon.

(Watch: Market expects $15 billion Fed taper soon: CNBC survey)

Speaking with Talking Numbers today ahead of the FOMC minutes is Tony Crescenzi, Executive Vice President, Market Strategist, and portfolio manager at Pimco. With nearly $2 trillion in assets under management, Pimco is the largest bond fund on earth.

In addition to Taper, Crescenzi says there are two other key things investors need to watch which may set the tone well into the coming year.

To see what Crescenzi thinks investors should be aware of with today’s announcements, watch the video above.

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