Tags: bill gross | german | bunds | short

Janus' Bill Gross Sees German 10-Year Bunds 'Short of a Lifetime'

Tuesday, 21 April 2015 12:38 PM

Bill Gross, the bond manager who joined Janus Capital Group Inc. last year, said the 10-year German bund is the “short of a lifetime.”

The German bund is “better than the pound in 1993,” Gross wrote in a Twitter message on Tuesday. “The only question is Timing/ECB QE,” he wrote, referring to quantitative easing by the European Central Bank.

The devaluation of the British pound in 1992 created unprecedented opportunities for investors including George Soros, who made $1 billion on his bet against the currency.

Gross has sharpened his position on the bund after earlier this month saying that his bet on U.S. Treasurys and against German debt is “not the trade of the century or the trade of the decade but I think it’s the trade of the year.”

Yields on 10-year German bonds have dropped from a 1-year high of 1.556 percent in April 2014, and reached 0.104 percent at 11:36 a.m. in New York. The yields reached a record low of 0.049 percent last week driven by the ECB’s stimulus measures, which include buying government bonds.

Gross, who abruptly left Pacific Investment Management Co. in September, now manages the $1.46 billion Janus Global Unconstrained Bond Fund. After a shaky first five months, he’s regained his footing.

The fund has advanced 2.1 percent this year, beating 74 percent of comparable funds, according to data from Morningstar Inc. Since inception, the fund has advanced 1.6 percent, beating 73 percent of peers, the data show.

Using Derivatives

Gross has been using derivatives to bet that prices on debt from the U.S., U.K. and Germany won’t swing outside a certain band. Gross sees German 10-year bunds, the euro area’s benchmark, as a type of anchor for U.S. government debt. At 0.495 percent, “it’s hard for a U.S. Treasury to move much higher,” Gross said Jan. 12 in a Bloomberg Radio interview with Tom Keene.

The fund struggled initially after Gross took over, declining 1.3 percent in the first five months through March 6. It trailed its benchmark in the fourth quarter last year primarily because it had plowed about 5 percent of net assets into debt issued by U.S., Russian and Brazilian energy companies. Those bonds and emerging market sovereign debt that Gross insured were all hit by the 42 percent collapse in crude prices in the period.

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Bill Gross, the bond manager who joined Janus Capital Group Inc. last year, said the 10-year German bund is the "short of a lifetime.
bill gross, german, bunds, short
Tuesday, 21 April 2015 12:38 PM
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