Kiesel is describing a lending tactic that borrows short-term money and makes longer term loans.
As interest rates rise, and short rates rise faster than long rates, this tactic is doomed.
* * * * * J B K * * * * *
San Francisco
March 26 (Bloomberg) -- Pacific Investment Management Co., manager of the world's biggest bond fund, says bank securities are the best investments in credit markets.
JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. are benefiting from a combination of slowing consumer loan losses and the Federal Reserve's zero interest-rate policy, according to Mark Kiesel, global head of corporate bond portfolio management at Pimco. Bondholders also will gain from banks raising capital to bolster their balance sheets, he said.
"If I could come back as any corporate entity in my next life it would be as a money-center bank," said Kiesel, who oversees $300 billion of credit investments from Newport Beach, California. "You can borrow money at virtually zero, you make prudent loans and you basically earn that spread."
http://www.bloomberg.com/apps/news?pid=20601010&sid=aURsZyAjYweE
