Friday, September 17, 2021

Bill Gross lashes out at ‘garbage’ government bonds

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Sovereign debt renewal

According to legendary former bond investor Bill Gross, bonds are “garbage” and buying US government debt is definitely a losing bet.

Gross, a former “bond king” who incorporated Pimco into a $ 2 trillion asset management company before leaving in 2014, offers the latest salvo to the asset class that made him famous for his rambling investment outlook. Fired Posted on his personal website..

US Treasury yields have fallen in recent months, reflecting a strong global rise in global debt prices that have blinded many large investors. Thursday’s 10-year Treasury yield (a benchmark for financial assets around the world) was only 1.29%, well below its peak in late March of 1.75%.

At today’s level, yields “have no choice but to rise,” Gross said, given that the Federal Reserve Board is expected to begin ending its bond purchase program soon. The 77-year-old, who retired from professional fund management two years ago, expects a 10-year Treasury yield to rise to 2% in the next 12 months, causing a loss of about 3% for investors. Said.

“Given that inflation is above 2% and economic growth prospects remain optimistic amid a reversal of quantitative easing, the $ 120 billion monthly Federal Reserve flood is probably mid-2022. It’s clear that it ends in, “he wrote. The central bank added that it has purchased 60% of the net issuance by the US government over the past year. “Therefore, how much does the private market want to absorb this future 60% after mid-2022?”

He added: “Cash has long been a trash can, but now there are new candidates for investment trash cans. Medium- to long-term bond funds are certainly in that trash can.”

After founding Pimco in 1971, Gross set up a company at the world’s largest fixed income asset management company, revolutionizing fixed income investment. He later became known for his extensive, often eccentric commentary on the market.His latest mission is no exception, touching on irreplaceable tokens, gymnast Simone Biles, and the 2018’dust-up’with his neighbor who blew up the theme tune. Gilligan Kimishima Beyond the fence of his California beachside mansion.

This week’s note isn’t the first time Gross has Tried to call time In the 40-year bull market for bonds. In March, he said he was shorting government bonds in anticipation of yields rising to 3%. He also revealed that he was betting on government bonds in early 2018 when he was working for the company he joined, Janus Henderson, after suddenly quitting Pimco in 2014.

Still, Gross is not the only investor Was kicked out By this summer’s financial rally. Many heavyweight bond investors stuck to bearish bets, despite a plunge in yields in July. Hedge fund It was piled up in the so-called reflation trade.

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