Bond yields and risk spreads were too low two months ago and global markets that were too levered are now derisking, according to Bill Gross, manager of the world’s largest mutual fund at Pacific Investment Management Co.

Gross’s $285 billion Pimco Total Return Fund led declines among the most-popular bond mutual funds earlier this month after the Federal Reserve sparked a global selloff in bonds by indicating it may start reducing asset purchases known as quantitative easing, or QE.

“In trying to be specific about which conditions would prompt a tapering of QE, the Fed tilted overrisked investors to one side of an overloaded and overlevered boat,” Gross wrote in his July commentary titled “The Tipping Point”, posted on Newport Beach, California-based Pimco’s website.

Gross’s flagship fund lost 1.6 percent from June 18 through June 20, the day after the Fed outlined its exit scenario, and was down 2.8 percent for the year, the worst of 19 U.S. total return funds with at least $2 billion in assets, according to data compiled by Bloomberg. The $4.2 billion Bernstein Intermediate Duration Portfolio was the third-worst performer this year, after Pimco Total Return and a related fund, falling 2.7 percent.

Bonds, stocks and commodities slumped after Fed Chairman Ben Bernanke put investors on notice the central bank is prepared to begin phasing out one of the most aggressive easing programs in its century-long history later this year. Ten-year Treasury yields climbed to a 22-month high of 2.66 percent on June 24, worsening a selloff that started last month.

‘Not Sinking’

U.S. gross domestic product rose at a revised 1.8 percent annualized rate in the first quarter, down from the previous estimate of 2.4 percent, the Commerce Department said yesterday. The first-quarter rate was projected to hold at 2.4 percent, according to a Bloomberg News survey of economists.

“The U.S. economy is not sinking, nor are the majority of global economies,” Gross wrote. “Their markets just had too much risk, and in Pimco’s opinion, too much hope for a constant QE and for the growth that it would produce.”

Bond-fund managers from Gross to Jeffrey Gundlach at DoubleLine Capital LP have said now is a bad time to sell bonds because the economy isn’t strong enough to sustain higher borrowing costs. Gross, who trailed peers in 2011 after dumping Treasuries before they rallied, said last week that investors who are selling U.S. government debt now are missing the influence of inflation on the central bank’s decisions.

Fund Withdrawals