Negative rates are only on the table because low-rate policies have failed, said Rivelle, whose team runs the $71.7 billion Metropolitan West Total Return Bond Fund.
Mattress Money
“Instead of admitting that, central bankers are doubling down,” Rivelle said in a telephone interview from Los Angeles.
Negative rates make conditions worse by pushing people to essentially put money into their mattresses, according to Mather, co-manager of the $89.3 billion Pimco Total Return Fund.
“They’re contractionary,” Mather said during an interview in Newport Beach.
There is growing concern about whether central banks have much ability to help support asset markets, according to Russ Koesterich, global chief investment strategist at BlackRock Inc. As Japanese and European stocks pull back, the suggestion of more stimulus has left investors jaded, he said.
U.S. Treasuries gained Thursday, pushing yields to the lowest in more than three years at one point. Global stocks entered a bear market as the MSCI All-Country World Index fell 20 percent from its high.
‘Crazy’ Trading
“This morning it was crazy,” said Dan Fuss, a veteran manager who helps run the $15.5 billion Loomis Sayles Bond Fund. “It was just going bananas. People were just buying, buying, buying the 10-year” Treasuries in the futures market.
Under a system of negative rates, lenders are charged fees for parking money at central banks. The idea is that banks will use that cash to make loans, jump-starting their economies.
Rivelle said the policy is likely to have the opposite effect in Europe, acting as a tax on banking systems already struggling.
“It could have the consequence of driving up borrowing costs,” he said.
Mather said it was unlikely the U.S. would go as far as Japan or the European Central Bank into negative territory.
‘24 Hours’
“If you did that in the U.S.,” he said, “I’m pretty sure your job as a central banker would last about 24 hours.”
Mather said bankers would be better off pursuing a different set of policies. Financial conditions would more likely rebound, he said, if the Fed said negative rates were off the table or if the ECB said there were limits to how far they were willing to pursue the strategy. He also suggested that central bankers could help the current situation by acquiring assets such as corporate debt.
Once the world’s largest mutual fund, Pimco Total Return beat 65 percent of peers over the past five years. The fund, which Mather runs with Mark Kiesel and Mihir Worah, gained 0.6 percent this year through Wednesday, trailing 69 percent of peers, according to data compiled by Bloomberg.
MetWest Total Return outperformed 81 percent of peers this year and 96 percent over five years. Rivelle oversees the fund with Stephen Kane, Laird Landmann and Bryan Whalen.