BlackRock Inc.’s Laurence D. Fink and Pacific Investment Management Co.’s Bill Gross said the U.S. budget standoff will be resolved without a debt default.
The congressional dispute will end “very rapidly,” Fink said yesterday at an event hosted by the UCLA Anderson School of Management at the Beverly Hilton hotel in Beverly Hills, California, and streamed on CNBC.com.
“It’s theatrics posed by politicians to get ratings or to get their way via legislation,” Gross said. “It’s not a realistic proposition.”
The stalemate between congressional Republicans and Democrats has led to a partial government shutdown this week and risks a U.S. debt default. The government will run out of borrowing authority Oct. 17, according to the Treasury Department, which said a default caused by Congress failing to raise the $16.7 trillion federal debt limit could have catastrophic consequences that might last decades.
The yield on the 10-year U.S. Treasury touched a seven-week low yesterday and the Standard & Poor’s 500 Index fell the most in a month as the budget deadlock persisted into a third day.
The two fund company executives, whose firms oversee more than $5.8 trillion in combined assets, are both alumni of the Anderson School. Both said the U.S. is the best place to invest. Gross added that he wouldn’t take undue risks on higher-yield assets.
‘Invest Carefully’
“I’d invest carefully and relatively short term and sacrifice the potentially higher yield,” said Gross, 69, who started Newport Beach, California-based Pimco in 1971 with two other co-founders and is co-chief investment officer with Chief Executive Officer Mohamed El-Erian.
Interest rates will be low for the next two or three years, he said.
“We live in a world of artificially compressed interest rates, and therefore artificially compressed returns,” Gross said.