Tags: Pimco | Gross | Treasurys | Plunge

Pimco's Gross: Treasurys Will Still Plunge

By Dan Weil   |   Wednesday, 01 Jun 2011 09:37 AM

Star bond fund manager Bill Gross admits he acted a little early in taking a negative position on Treasury securities during March in the Pimco Total Return Fund. But he insists it was just a mistake in timing, not in direction, The New York Times reports.

Treasurys have surged since Gross implemented his negative position through swaps – he insists he’s not actually short Treasurys themselves. The 10-year Treasury yield has dropped to 3.05 percent, its lowest level of the year, from 3.47 percent March 31.

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Pimco's Bill Gross
(Pimco photo)
“I was premature,” Gross tells The Times. But he says his bearishness will be proven correct.

Once the Federal Reserve stops its $75 billion a month of Treasury purchases June 30, the Treasury market head for a tumble, Gross says. And the Fed’s low interest rate policy won’t help.

Eventually Treasury investors will realize that their low or negative real yields mean they’re getting “skunked,” he says.

“Bond investors are receiving almost nothing for their money, and the situation is getting worse and worse. But they’ve gotten used to it. They don’t realize how bad it is. And before they know it, well, they’ll be cooked.”

For now, though, signs of U.S. economic weakness continue to buoy Treasurys. “Economic releases have all been disappointing, and that’s caused Treasurys to rally,” Christopher Bury, co-head of fixed income at Jefferies & Co., tells Bloomberg.



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Star bond fund manager Bill Gross admits he acted a little early in taking a negative position on Treasury securities during March in the Pimco Total Return Fund. But he insists it was just a mistake in timing, not in direction, The New York Times reports. Treasurys have...
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