(Adds quotes on Mexico and central bank policies)
NEW YORK, June 10 (Reuters) - Bill Gross of Janus Capital Group Inc said on CNBC Wednesday that he recently began investing in Mexican government debt securities.
“The best idea, and it hasn’t worked yet, but it’s only been under way for about a week or two, is in Mexico,” Gross said. “Mexico has 7 percent nominal interest rates. Mexico has 3 percent real interest rates. That means, even though Mexican inflation is higher, 3 percent or so relative to the United States, that’s all adjusted for in terms of a ‘linker’ or a TIP (Treasury Inflation Protected Securities).”
Mexico 10-year inflation-linked bond securities yielding 3 percent compared with U.S. 10-year TIPS yielding 0.5 percent provides a “2.5 percent spread between those two. Believe me, the quality difference doesn’t justify it,” Gross said.
Earlier on Wednesday, Gross tweeted: “QEs (Quantitative Easings) worldwide supporting financial assets: ECB + BOJ each $1 trillion. U.S. Corp buybacks $1 trillion + as well; China too. What happens when it stops?”
He was referring to the European Central Bank and Bank of Japan.
On CNBC, Gross answered: ”Well, liquidity dries up. And if we think that liquidity is poor now, it’ll be even worse two, three, four, five years from now when these maneuvers typically stop. You would think a central banker wouldn’t stop if they knew that it would produce a crisis at the moment and lots of volatility.
“The global markets have benefitted to the extent of trillions of dollars of liquidity over the past few years. And we have to wonder what happens when they don‘t.” (Reporting by Jennifer Ablan; Editing by Alan Crosby and Lisa Shumaker)