Bill Gross Cautiously Steps Away from Overvalued 10-Year Treasury Bonds
AInvestWednesday, Jan 10, 2024 4:28 am ET
1min read

Renowned billionaire investor Bill Gross has decided to distance himself from bonds after accurately predicting the direction of interest rates in late 2023. In a recent post on X, Gross articulated his view that the 10-year Treasury is currently overvalued with a yield of approximately 4%. 

Towards the end of last year, the 10-year Treasury experienced a significant rally, plunging below the critical 4% mark to as low as 3.78%. However, it rebounded last week, crossing over the 4% threshold amidst a tumultuous start to the year for the markets. It is important to note that bond prices and yields move in opposite directions. 

The co-founder of Pimco, popularly known as the Bond King, advised investors that Treasury Inflation-Protected securities, offering yields of around 1.8%, present a more favorable alternative if you need to buy bonds. Gross personally added, I don't.

Over the years, Gross has earned his fame due to his accurate predictions on bonds and interest rates. His latest analysis of the bond market follows his successful bet on the trajectory of interest rates in 2023. By purchasing futures contracts linked to the SOFR, a short-term lending rate for dollar-denominated loans, Gross capitalized on traders' anticipation of future Fed rate cuts. His astute move resulted in a profit of $4 million, according to Bloomberg's calculations. 

Additionally, Gross revealed that he is withdrawing his previous recommendation of regional bank stocks made six months ago, as well as his endorsement of mortgage REITs from December. However, he continues to advocate for arbitrage opportunities in imminent deals, such as Tapestry's acquisition of Capri.

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