Billionaire bond investor Bill Gross says investors should plan for asset purchases by global central bankers to continue to dominate financial markets and keep interest rates artificially low.
“For now, investors must go with, indeed embrace this financial methadone QE fix,” Gross wrote in a monthly investment outlook published Monday. “Quantitative easing will continue even though the dose may be reduced in future years. But while a methadone habit is far better than a heroin fix, it has created and will continue to create an unhealthy capitalistic equilibrium that one day must be reckoned with.”
Yields on 10-year U.S. Treasuries are likely to rise gradually but stay artificially low “due to the kindness of foreign central bank quantitative easing policies,” according to Gross, 72, who runs the $1.77 billion Janus Global Unconstrained Bond Fund. The fund returned 5.3% in 2016, beating 55% of its Bloomberg peers, and since he took over in October 2014 it’s up about 4.8%.
He said in January that 10-year Treasuries above 2.6% would signal a bond bear market as rising rates reduce the value of older debt. Rates are expected to pass 2.6% in the second quarter of this year, according to data compiled by Bloomberg.