PIMCO’s Bill Gross is a big fan of bonds for U.S. commercial banks that are due to receive money from the federal government. Dan Weil from Internet news site Newsmax.com wrote yesterday:

What to do when the government invests in banks throughout the land? Join them, says bond fund manager Bill Gross.

Bonds for commercial banks included in the Treasury’s equity-purchase program are particularly attractive, says Gross, chief investment officer of bond giant Pimco.

KeyCorp, Ohio’s third-largest bank, and Regions Financial, Alabama’s biggest bank, are members of that club. KeyCorp will sell $2.5 billion of stock to the Treasury, while Regions will provide a $3.5 billion equity position.

After doling out $125 billion to nine of the nation’s biggest banks, the Treasury is now sending $34 billion more to 15 regional banks.

“We like the ones that are submitting applications,” Gross told Bloomberg TV. “The government is investing 10 to 15 percent of the banks’ total capital themselves into the company. So why not be a partner with the government at a higher yield than the government is giving?”

“It’s a slam dunk,” Gross says.

Source:

“Gross: Bank Bonds a Screaming Buy”
Dan Weil
Newsmax, October 28, 2008

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