PIMCO: Only A Recession Would Stop Us From Shorting U.S. Bonds

PIMCO's Bill Gross, who runs the world's largest bond fund, said on Friday the only way he would reverse his "short" position on U.S. government-related bonds is if the United States heads into another recession.

Since the April 11 news that Gross turned more bearish on U.S. Treasury debt, reflecting his growing worries over the country's fiscal deficit and debt burden, Treasury prices have been soaring.

On Friday Treasury prices fell though after a better than expected U.S. monthly employment report.

Asked Friday Gross told Reuters: "Treasury yields are currently yielding substantially less than historical averages when compared with inflation. Perhaps the only justification for a further rally would be weak economic growth or a future recession that substantially lowered inflation and inflationary expectations."

The benchmark 10-year U.S. Treasury note was down 7/32, with the yield at 3.18 percent, on Friday. On April 11, the yield stood at 3.58 percent.

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[altohone]

01:23 PM on 05/09/2011

Who is taking his bets?
That is the question.

[Oren Grossi]

10:42 AM on 05/08/2011

This is no big deal. All he is saying is that treasury interest rates are low and he thinks they will go higher. He doesn't want to lock his investments into low yields when he can wait and get better interest rates for his money. He's actually betting that the recovery will be strong enough to allow for higher interest rates.

[peanut]

08:59 AM on 05/08/2011

I own Pimco funds...it has done well over the years...well managed !

[holyghostie]

10:00 PM on 05/07/2011

PIMCO is one of the best Bond funds in the world. If they are shorting our debt its with good reason.

[Majestry]

09:29 PM on 05/07/2011

Luckily for him, the republicans are going to give us another recession. They might even give us a depression if they really try to get what they want!

[joe kim]

09:31 AM on 05/08/2011

did you read the article? it says only if we have a recession will he be wrong and have to reverse himself. how would a recession/depression help him? it would hurt his position.

you should learn to read.

[kauthon]

10:18 AM on 05/08/2011

Here's how it would help him. With the economy getting better people have more choice on where to invest with better returns. If we have another global recession people will put their money back in US treasuries as they are as stable as you can get in a recession.

[Majestry]

10:21 AM on 05/08/2011

No, I didn't, and you should blow me.

[Matt12]

07:42 PM on 05/07/2011

He is worried about the US economy? He and his brethren are the cause of it and should be held responsible for the economic chaos, high unemployment and decline of the US.

[olephart]

04:54 PM on 05/07/2011

As Louis used to say the only time the bond ghouls are happy is when everyone is out of work and the economy is dead.

[CPA 4 Life]

02:10 PM on 05/07/2011

Only 45 comments. Then again this is beyond the intellectual capacity of the financial illiterate drones that only shout "speculator"

[Linda from Deerfield]

09:55 PM on 05/08/2011

Just wait until you hear what I think. I think that Bill Gross is a man who could not resist the temptation of taking credit for a world in which bonds couldn't lose. Now in a position to make and manipulate markets, he cannot stop himself -- faced with a world that should sink his fund, he chooses to try to manipulate reality. Who can blame him, after all, it's for the poor customer who is too gullible to know any better, right? I'm glad I didn't join.

[CPA 4 Life]

11:15 PM on 05/08/2011

Gross doesn't have to say a thing for US Treasury yields to rise in the coming years. The global recovery will cause foreign investors to pull out of USD and US Treasuries. The effect of the Fed's QE programs geared at fooling the international community into loaning us money long term at 3% interest will fade (if a private firm cornered 33% of market they would be fined by the SEC). The Chinese have pegged the yuan to the dollar to keep domestic inflation down. But as our inflation rises the Chinese will revalue the yuan to quell the pass through of US inflation into China.

Over a 10-year horizon, the only way 3% return on USD assets makes sense for foreigners is a double-dip recession. Over a 10-year horizeon, the only way 3% return on USD assets domestically is if a double-dip recession slows banks from unleashing their reserves at the Fed, which have a velocity of 0, the only reason we don't have high inflation now.

[Tom Hickey]

12:54 PM on 05/07/2011

"Go Gundlach not Gross" is going to be the new bond trader manra. Jeff went long when Bill was shorting.

[Justan Olfrend]

11:17 AM on 05/07/2011

Food and fuel prices (commodities in general) are being manipulated at this time. Subtracting the likely speculative commodities that are stealing from wallets, where is this inflation?

[portfolio]

10:55 AM on 05/07/2011

Short treasuries and metals.

Long mid cap stocks, esp. cyclicals.

[Beachchick]

05:23 AM on 05/07/2011

Inflation? The rich need a generous tax hike.

[Carolab]

02:46 AM on 05/07/2011

Gross knows rates will go up.

Hey -- Greece is trying to exit the Eurozone!

http://www.nakedcapitalism.com/2011/05/euro-whacked-by-reports-that-greece-will-leave-the-eurozone.html

[ProletarianRenegade]

11:37 AM on 05/09/2011

Good news if it happens.

[muysuave41]

02:15 AM on 05/07/2011

I wonder what his outlook would be if he were paying 38% in taxes......

[olephart]

04:51 PM on 05/07/2011

If he and his friends were all paying 38% in taxes, there were no wars and our military's only purpose was to defend us there wouldn't be any treasury bonds to purchase.

[Danlar]

12:35 AM on 05/07/2011

Perhaps he will be buying more Munis and Corporate Bonds because he feels the economy is getting better......Ok fine great....this is more a good sign of our economic outlook.