The former bond king, Bill Gross, says 10-year Treasury is 'overvalued'

By Steve Goldstein

The former bond king doesn't like the fixed-income security that's the lynchpin of the financial world.

Bill Gross, the retired fund manager and co-founder of Pacific Investment Management, took to the social-media service X to say that the 10-year Treasury BX:TMUBMUSD10Y is "overvalued" with a yield of 4%. Yields move in the opposite direction to prices.

Through Monday, the yield on the 10-year Treasury has fallen 99 basis points from its late October peak.

He said the 10-year Treasury inflation-protected yield at 1.80% is the better choice. "If you need to buy bonds. I don't," said Gross.

Gross also continued to talk of his idea to go long 2-year bonds BX:TMUBMUSD02Y while shorting the 10-year. "Stick with the return to a positive 10 year/2 year yield curve. Earns carry while you wait," he said. In previous posts, he talked of making such trades via Treasury futures contracts.

Gross said he was taking a bow for his recommendation of regional bank stocks six months ago and mortgage REITs in December. The SPDR S&P Regional Banking ETF KRE has climbed 49% from its May 4 low, and the iShares Mortgage Real Estate ETF REM has gained 21% from its late October low. Gross in November highlighted Annaly Capital Management (NLY) and AGNC Investment Corp. (AGNC) as mortgage REITs he likes for 2024.

Gross said he still likes Capri Holdings (CPRI) as a merger arbitrage target. Tapestry (TPR) in August agreed to buy Capri for $57 per share, and on Monday, Capri closed at $50.49.

-Steve Goldstein

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01-09-24 0733ET

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