Bill Gross Losing to Bond Dealers as Treasuries' Outlook Gains

The news service notes that, so far, Goldman Sachs Group Inc., Credit Suisse Group AG and the rest of the primary dealers are proving right. U.S. bonds of all maturities are generating their best returns since August, gaining 0.49% this month. Optimism Congress will cut spending, slower growth and rising demand from banks meeting tighter risk standards governing the capital they must hold to cushion against losses are supporting bond prices.

Yields on 10-year notes ended last week at 3.39%, down from this year’s high of 3.77% on Feb. 9, even as Standard & Poor’s cut its outlook for the U.S.’s top AAA credit rating to “negative” from “stable.” S&P said the move indicates a one-in-three chance of a downgrade.

 “What’s telling is the significant volume of buying when 10-year yields were above 3.50% and 30-year bond yields were around 4.65%,” William O’Donnell, head U.S. government bond strategist at RBS Securities Inc., a primary dealer, told Bloomberg. “There’s still significant demand for long-end Treasury paper at those levels and I don’t think Bill Gross is going to make that demand disappear.”