Bond market guru Bill Gross of Pimco says the recent rally in junk and mortgage bonds has sent those securities to overvalued levels.

The easy money has been made in junk bonds, he told Bloomberg.

“Yields are down to the 7.5, 8, 8.5 percent area. Typically and historically, those spreads are about as tight as they can get.”

Elsewhere in the bond market, “You don’t look for mortgages, because they as well are overvalued based on the Fed’s purchase program, which will continue until March,” says Gross who manages the world’s biggest bond fund for Pimco.

So where should bond investors turn?

“If high yield isn’t there, if mortgages aren’t there, that really leaves you with Treasuries, investment grade corporates and emerging markets to some extent,” Gross says.

“Yes, that’s a limited menu so to speak, but that’s what we’re presented with at the moment.”

As for the Federal Reserve, Gross says it won’t begin raising interest rates until nominal GDP growth, which isn’t adjusted for inflation, reaches 4 to 5 percent.

“That awaits the end of 2010 at least, and it remains a debatable question whether the central bank can reflate. . . We have our doubts.”

Other experts see value in Treasuries, just like Gross.

“With a little bit of a weak stock market, there is a bit of a reversal of the so-called risk trade (to Treasuries)," David Dietze, chief investment strategist at Point View Financial Services, told Reuters.