Bill Gross slams “junk” government bonds

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Sovereign bond update

Bonds are “junk” and buying US government bonds will almost certainly fail, said Bill Gross, a legendary former bond investor.

Gross is the former “bond king”. He turned Pimco into a $2 trillion asset management company before leaving in 2014. He recently launched a fierce attack on this asset class, which gave him a boundless investment outlook. Famous in Posted on his personal website.

In recent months, U.S. Treasury yields have fallen sharply, reflecting the strong rebound in global debt prices that caught many big investors by surprise. On Thursday, the 10-year U.S. Treasury bond yield as the benchmark for global financial assets was only 1.29%, well below the peak of 1.75% at the end of March.

Gross wrote that since the Fed will soon begin to scale back its bond purchase program, yields “can only rise” at today’s levels. The 77-year-old who retired from the professional fund management department two years ago said that he expects the 10-year U.S. Treasury bond yield to rise to 2% in the next 12 months, causing investors to lose about 3%.

He wrote: “As the quantitative easing policy is about to reverse, given that inflation exceeds 2% and economic growth prospects remain optimistic, the Fed’s $120 billion monthly flood is likely to end sometime in mid-2022,” he wrote. Wrote, adding that the central bank purchased 60% of the US government’s net issuance in the past year. “So, how willing is the private market to absorb 60% of the future in mid-2022 and beyond?”

He added: “Cash has been garbage for a long time, but now there are new competitors in the investment trash can. Mid- to long-term bond funds must be in that trash can.”

After founding Pimco in 1971, Gross completely changed bond investment and built the company into the world’s largest fixed-income asset management company. Later, he became known for his extensive and eccentric comments on the market.His most recent letter is no exception, involving irreplaceable tokens, gymnast Simone Biles, and the “dust settled” with neighbors in 2018, in which he criticized the theme song Gilligan Island Over the fence of his California beachfront mansion.

This week’s notes are not the first time for Gross Trying to call time In the four-year bull market of bonds. In March of this year, he said he was shorting U.S. Treasury bonds and expected the yield to climb to 3%.He also revealed that he bet on government bonds while working for Janus Henderson in early 2018, and he joined the company after abruptly exiting Pimco in 2014

Nevertheless, Gross is far from the only investor Catch it out Rebound through the national debt this summer.Although yields plummeted in July, many heavyweight bond investors still insisted on placing their bearish bets, which resulted in huge losses for some celebrities Hedge Fund This has become the so-called reinflation transaction.

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