The German 10-year bund yield’s first-ever dip below zero on Tuesday is negative for markets because it reflects lack of confidence in European monetary policymakers, Pimco Global Strategic Advisor Richard Clarida said.
“It tells us that the markets don’t believe that the ECB is going to be able to reflate the European economy,” he told CNBC’s “Squawk Box.”
The European Central Bank added investment grade, nonbank corporate bonds to its asset-buying program from June 8 to make borrowing cheaper, induce companies to spend and lift a sluggish euro zone economy, which is recovering only slowly from a debt crisis.
The ECB said it bought 348 million euros ($392 million) worth of corporate bonds last week as part of its 1.74 trillion euro scheme to revive growth and inflation. The figures are at the upper end of analyst prediction.
Lower rates abroad could affect the Federal Reserve’s ability to raise interest rates, Clarida said. Easy money abroad effectively tightens monetary conditions in the United States, making it harder for policymakers to guide rates higher.
In this environment, Clarida said Pimco is looking for companies and sectors that are not overly dependent on central bank policy effectiveness, which the firm believes is diminishing.
“We really think it’s a bottom-up market, not a top-down market,” he said.
“You have to do your credit quality. You have to look at individual companies. You have to look at the sectors that you like, as opposed to making an overall top-down macro call.”