Tags: Gross | Treasury | Yields | Jump

Gross: Bond Yields May Jump Above 4 Percent

By    |   Wednesday, 20 Jan 2010 08:57 AM

Treasury bond yields, which already have risen enough to put the yield curve at record steepness, have further to go, says superstar bond manager Bill Gross.

The exploding budget deficit could push the 10-year Treasury yield above 4 percent this year, up from about 3.65 percent now.

The yield curve measures the premium of long-term Treasury rates over short-term rates.

“If you go back in history and look not just in the U.S. but in global fixed-income markets for several centuries,” Gross told The New York Times, you will rarely find a steeper yield curve.

That’s bad news for investors seeking safety. At the short end of the yield curve they face money-market rates of next to zero.

The 100 biggest money market funds now have an average yield of 0.05 percent, a record low.

“It’s so low it’s a joke,” Peter Crane, president of Crane Data, told The New York Times.

“At that yield, it would take more than 1,000 years to double your money.”

And then at the long end of the yield curve, safety-minded investors have to worry about bond prices falling.

Remember that rising yields mean falling bond prices.

The bond market today resembles the stock market of the late 1990s, experts say.

“It has a bubble look to it,” Thomas Atteberry, manager of FPA New Income, one of the largest bond funds, told Smart Money.

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Treasury bond yields, which already have risen enough to put the yield curve at record steepness, have further to go, says superstar bond manager Bill Gross. The exploding budget deficit could push the 10-year Treasury yield above 4 percent this year, up from about 3.65...
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2010-57-20
Wednesday, 20 Jan 2010 08:57 AM
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