PIMCO manager Bill Gross has taken to Twitter to hammer home the idea that there’s value in bonds as the Fed continues to support markets with quantitative easing and bond buying.
The bond king’s Monday morning tweet was, initially, simple and direct: “One big idea—policy rates cannot normalize.” The manager fleshed out the tweet with “policy implications: curves remain steep, bullets beat barbells.”
GROSS: One Big Idea – policy rates cannot normalize. Portfolio implications: curves remain steep, bullets beat barbells.
— PIMCO (@PIMCO) July 22, 2013
While his Twitter followers asked for clarification (“could you explain the bullet strategy?” one tweet asked), an earlier Gross tweet on Sunday left little doubt the portfolio manager was long on bonds.
Gross: So bonds come out of their coffin & it’s not even Halloween. #Bernanke says follow policy rate & we agree. 2016 tightening @ earliest
— PIMCO (@PIMCO) July 21, 2013
Gross’s current tweets expand and amplify his latest long-form investment outlook, where — in his July letter to investors — he stated that bonds were oversold in response to Fed Chairman Ben Bernanke’s May comments about “tapering,” or reducing the Fed’s commitment to buying U.S. Treasuries and mortgage-backed securities.
In that outlook three weeks ago, Gross argued that the Fed was committed to a 25-basis-point federal funds rate to last beyond the end of its bond-buying program.
“If frontend curves are up to 50 basis points cheap, then intermediate curves — the 10-year Treasury — may be as much as 35 basis points too cheap,” Gross wrote. “They belong in our opinion at 2.20% instead of 2.55%.”