Reply To: Traders Market Weekly: Avoid Whiplash, Fasten Your Seatbelts


Bill Gross, the legendary bond and fixed income pioneer, has recently released a new Investment Outlook titled “They Just Wanna Sell You a Bond Fund” 1. In this outlook, he makes some interesting points about the bond market and Treasury yields.

Total Return Concept:
Bill Gross helped originate and popularize the concept of “total return” bond funds almost four decades ago.
The idea was based on the observation that with rock-bottom durations (around 6-7 years) and a 15% yield on 30-year Treasuries, these investments could go up to 17.5% before investors would be in the red.
However, the landscape has changed significantly. With 10-year yields bottoming at 53 basis points (near 0%) and durations now exceeding 20 years, the total return concept is no longer viable.
Gross declares that “Total Return is dead” and advises investors not to fall for bond funds that promote this outdated approach.
Treasury Yields and US Deficits:
Gross warns against betting on falling Treasury yields.
He points out the inexorable upward climb in Treasury supply, which puts pressure on yields.

He predicts that 10-year yields will rise above 5% over the next 12 months, rather than staying at 4.0%
US Debt and Economic Growth:Gross highlights the substantial outstanding public debt issued by the Federal government, which currently stands at nearly $30 trillion.
He emphasizes that the US economy requires fiscal deficits and net increases in Treasury debt (1-2 trillion or more annually) for sustainable growth

In summary, Bill Gross’s outlook suggests that investors should be cautious about bond funds and consider the changing dynamics of the bond market. His insights provide valuable context for understanding the current economic landscape 1. If you’d like to read the full text of his Investment Outlook, you can find it on his website here.1

Remember that investment decisions should always be made based on thorough research and personalized financial advice. 😊