First there was a tech stock bubble, then a real estate bubble.
Now a Treasurys bubble?
That’s what superstar bond fund manager Bill Gross said after a $30 billion auction of one-month Treasury bills produced a yield of zero this week.
Some bills traded in the secondary market with a negative yield. People were literally willing to lose money to buy them.
“Treasuries have some bubble characteristics, certainly the Treasury bill does,” Gross, co-chief investment officer of bond giant Pimco, told Bloomberg TV.
“A Treasury bill at zero percent is overvalued. Who could argue with that in terms of the return relative to the risk? There is no return.”
To be sure, Gross regrets missing out on the rally that has sent the benchmark 10-year Treasury yield down to 2.67 percent.
“If we had our druthers, if we went back 12 months and we had known then what we know now, it would have been all invested in Treasuries,” he says.
But that opportunity is over now, Gross maintain. “The question going forward is ‘Is it the winner over the next 12 to 24 months?’ We don’t think so.”
Gross isn’t the only one who believes Treasuries are overbought.
Treasuries have “absolutely” entered a bubble, David Brownlee, head of fixed income at Sentinel Asset Management, told Bloomberg.
“There is very little rationality in my mind to bills trading at zero.”
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