Markets not pricing in enough Fed rate risk: PIMCO's Balls

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Andrew Balls, PIMCO's global fixed income chief investment officer, said investors had priced in the prospect of relatively low interest rates in the future but it was "perfectly plausible" that the Federal Reserve could raise borrowing costs above the so-called neutral rate level over time.

"Even with our 'new neutral' idea, we don't think the markets are pricing in enough risk premium around the Federal Reserve rate hike cycle to come," Balls told reporters.

He also said yields on German government bunds had been "ridiculously low" and still looked too low while U.S. inflation-protected bonds looked reasonable as inflation will pick up and could hit 2 percent possibly as soon as in 12 months' time.

(Reporting by Jamie McGeever, writing by William Schomberg)