Governments struggling with huge debt loads and now embarking on fiscal austerity measures, such as Greece, may be unable to grow their way out of trouble, the manager of the world’s biggest bond fund wrote on Wednesday.
Bill Gross, the co-chief investment officer of Pimco and manager of the firm’s Total Return fund, said in his monthly note to investors that higher market interest rate levels will impede full repayment.
A surge in the London Interbank Offer Rate (Libor) is dimming hopes for a sustained global economic recovery because an increase in banks’ borrowing costs can spark higher interest rates for borrowers on everything from mortgages to corporate loans.
“At the now restrictive yields of Libor plus 300-350 basis points being imposed by the EU and the IMF alike, there is no reasonable scenario which would allow Greece to ‘grow’ its way out” of debt, Gross wrote. Pacific Investment Management Co. oversees more than $1 trillion in assets.
Libor is indicative of the different prices at which a panel of banks in London estimate they could obtain funds in the interbank market.
Read More: – Reuters