Fed should switch, not twist to revive economy, says Bill Gross

NEW YORK: Bill Gross says the Federal Reserve should sell longerterm Treasuries and buy shorterterm notes to remedy the economy.

Longer-term debt usually carries higher interest rates than shortterm loans, but the difference has flattened as central bankers keep rates low to stimulate growth. The Federal Reserve in 2012 initiated "Operation Twist," purchasing 10 year Treasuries as a tool to revive US growth and reduce the unemployment rate, a move that Gross asserts failed to build a strong economic foundation. "I propose an 'Operation Switch'," Gross wrote in an investment outlook on Tuesday for Denver-based Janus Capital Group. "Instead of 2012's 'Operation Twist', which sold 2-5 year notes and reinvested the proceeds in longer-dated Treasuries now resting in their portfolio, he Fed should do just the reverse."

Gross, whose Janus Global Unconstrained Bond Fund lost 2 percent in he past year, has been urging cen ral bankers to end the low-interestrate policies that are creating asset bubbles while failing to spur growth n the real economy. In his monthly etter in September, he said the Fed should "Get off zero now!" and risk rading some near-term market osses for longer-term stability.

"Capitalism does not function well, and profit growth is stunted if short-term and long-term yields near the zero bound are low and he yield curve inappropriately lat," Gross said in Tuesday's note.