Pimco’s Gross admits US debt ‘mistake’

From the Financial Times, London:

"Bill Gross, manager of the world’s largest bond fund for Pimco, has admitted that it was a mistake to bet so heavily against the price of US government debt.

Mr Gross emptied his $244bn Total Return Fund of US government-related securities earlier this year in a high-profile call that has backfired as the bond market has rallied. As of Monday, Pimco’s flagship fund ranked 501th out of 589 bond funds in its category.

“Do I wish I had more Treasuries? Yeah, that’s pretty obvious,” Mr Gross told the Financial Times last week, adding: “I get that it was my/our mistake in thinking that the US economy can chug along at 2 per cent real growth rates. It doesn’t look like it can.”

When the yield on the 10-year Treasury was 3.5 per cent in January, Mr Gross warned that the risk of rising inflation made government debt a poor investment....

Mr Gross, one of the most influential voices in the bond market, reiterated his warning to avoid Treasuries in June, and in the July dispatch of his widely read Investment Outlook, warned that promises to America’s ageing population made them “debt men walking”.

However, this month, as turmoil in equity markets caused investors to rush to the safety of government bonds, the 10-year Treasury yield dipped below 2 per cent, a 61-year low...

Mr Gross started to buy government debt, as well as related securities and derivatives, in recent months. However, he faces a challenge to catch up to the benchmark, which has returned 4.55 per cent for the year so far, versus the Total Return Fund’s 3.29 per cent, according to Lipper, a research group."

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Link: http://www.ft.com/intl/cms/s/0/dbe0ab88-d24b-11e0-9137-00144feab49a.html