Legendary Bond Investor Bill Gross Sees More Downside on Treasuries

Bill Gross, the co-founder of Pacific Investment Management Co., shared some of his views on bonds, commodities and forex on Bloomberg Television Tuesday.

Gross, who once managed the world’s largest bond fund, expressed seeing a 3% to 4% inflation in the coming months, despite inflation currently sitting below 2%. 

Gross said he is short on the US 10-year Treasury through the futures market. He said he entered his short on the 10-year Treasury when the yield was 35 points below the current level around 1.6%. 

The growing bearish sentiments on bonds were underpinned by the recently passed $1.9 trillion stimulus bill. Moreover, the 10-year breakeven inflation rate is currently at the highest level since January 2014.

Federal Reserve Chairman Jay Powell has stated not to worry about inflation spikes until both employment and price stability targets are determined to be met by the central bank.

Besides Gross’s short bet on Treasury, he is also anticipating a combination of higher commodity prices (such as gold and oil) and a weaker dollar.

In particular, both Gross and Warren Buffet had made a similar bet on natural gas. A natural gas index MLPs has risen near 28% this year, backed by the oil market and supply shortages in Texas due to the winter storm.

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