The time where investors are no longer willing to accept negative yields on U.S. Treasuries is near, Bill Gross, manager of the world’s largest bond fund for PIMCO warned.
“With the U.S. suffering a credit downgrade to AA+ and offering negative 200 basis point policy rates for the privilege of investing in Treasury bills, the willingness of creditors – as opposed to debtors – to support the existing system may soon fade,” Gross wrote in a Financial Times editorial published on Tuesday.“With dollar reserves widely dispersed in China, Japan, Brazil and other surplus nations, it is fair to assume that there will come a point where 2 percent negative real interest rates fail to compensate for the advantages heretofore gained in buying sovereign bonds," he added.
Gross recently cut his exposure to Treasuries, reflecting his negative outlook for U.S. government debt. His $252 billion Total Return Fund held 32 percent in U.S. Treasuries and Treasury-related securities as of the end of March 31, down from 37 percent at the end of February, according to PIMCO's website.
In his investment outlook for May, Gross warned that inflation in the U.S., which currently stands at 2.7 percent, is set to climb higher and further erode returns on government debt.
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“With the U.S. suffering a credit downgrade to AA+ and offering negative 200 basis point policy rates for the privilege of investing in Treasury bills, the willingness of creditors – as opposed to debtors – to support the existing system may soon fade,” Gross wrote in a Financial Times editorial published on Tuesday.“With dollar reserves widely dispersed in China, Japan, Brazil and other surplus nations, it is fair to assume that there will come a point where 2 percent negative real interest rates fail to compensate for the advantages heretofore gained in buying sovereign bonds," he added.
Gross recently cut his exposure to Treasuries, reflecting his negative outlook for U.S. government debt. His $252 billion Total Return Fund held 32 percent in U.S. Treasuries and Treasury-related securities as of the end of March 31, down from 37 percent at the end of February, according to PIMCO's website.
In his investment outlook for May, Gross warned that inflation in the U.S., which currently stands at 2.7 percent, is set to climb higher and further erode returns on government debt.
Continue reading here.
