Pacific Investment Management Co., which runs the world’s biggest bond fund, says short-term Treasuries will be among the biggest beneficiaries after Lawrence Summers quit the race to head the Federal Reserve.
The former Treasury secretary withdrew from consideration in a letter to President Barack Obama yesterday, ending speculation he would undo the bank’s policies aimed at holding down borrowing costs. Fed Vice Chairman Janet Yellen had also been mentioned by Obama as a candidate for the chairman role, and she’s now the front-runner for the job when Ben S. Bernanke’s term expires in January, according to Mohamed El-Erian, Pimco’s chief executive and co-chief investment officer.
“Markets will likely interpret this as significantly increasing the probability of broad policy continuity at the Fed,” El-Erian wrote in a commentary on the Business Insider website. “This would be seen as being particularly supportive for the front end of the Treasury curve,” referring to the spectrum of maturities.
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