Bill Gross, who runs the world's biggest bond fund at Pacific Investment Management Co. predicted the "end of the bull market" for Treasuries in a report published on Jan. 7, saying the bonds may need to be "exorcised" from model portfolios and replaced with "more attractive alternatives."
'Bond Riot'
"The only happy thing that can happen in the U.S. is a bond riot" where investors stop buying debt, Taleb said today. This would "force some discipline" in to the Treasuries market, he added.
Russia, the world's third-biggest holder of short-term Treasury debt behind Hong Kong and Japan, has trimmed its holdings of the securities by 25% since March 2009, according to U.S. Treasury Department data. The country held $55.2 billion of the bills as of the end of November, or 7.3% of the total outstanding, the data shows.
The world's largest energy exporter boosted its holdings of U.S. debt 200% in the six months following the September 2008 collapse of Lehman Brothers Holdings Inc. to a record $73.2 billion in March 2009. Treasuries surged during the global financial crisis, climbing 14% in 2008, as investors sought out the relative safety of U.S. government debt.
'Biggest Accident'
Rising real interest rates in the U.S. are a worldwide concern, said Bhanu Baweja, global head of emerging-market fixed-income and currency strategy at UBS AG.
"The biggest accident that the global economy could face is in the U.S. government bond market," Baweja said by phone from London. "I'm also worried about U.S. Treasuries."
Standard & Poor's won't cut its AAA rating on U.S. government debt "in the short-to medium-term," Scott Bugie, managing director for financial institutions at the ratings agency, said in Moscow today.
Ten-year Treasury yields have dropped 0.21 percentage points, or 21 basis points, in the past year, while the yield on two-year notes has declined 19 basis points.