Monday, February 25, 2008

Aussie Bonds Look Good: The Reserve Bank Has Guts

Bill Gross manages big money: $120 billion in bonds. He does this on behalf of California-based Pacific Investment Management Co. (PIMCO.) PIMCO's bond fund is the world's largest.

Guess what he likes: Aussie bonds.

According to a report on Bloomberg this morning, "'The Reserve Bank of Australia should be commended for [its] inflation targeting,'' Gross said. 'Australia has some of the most attractive real interest rates in the world.'' In other words, the Reserve Bank of Australia takes seriously its job of maintaining the value of the Australian dollar. The Australian central bank pursues a policy of keeping inflation between two and three percent a year.

Bloomberg News, based on a near unanimous poll of economists, predicts "Australia's central bank Governor Glenn Stevens will raise the benchmark interest rate by a quarter-percentage point to 7.25 percent at the next policy meeting on March 4."

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