Pacific Investment Management Co.’s Bill Gross said the end of the 30-year rally in U.S. bonds is unlikely to be reminiscent of the drop in 1994, when the Federal Reserve raised interest rates more than forecast.
Markets are entering “a 12-month period of time ahead in which, combined, Treasury, corporate and high yields don’t move much,” Gross, co-founder and co-chief investment officer of Newport Beach, California-based Pimco, said in a Bloomberg Television interview with Erik Schatzker and Sara Eisen.
The manager of the world’s biggest bond fund said last week that the bull market for bonds probably ended at the end of April as yields reached a low and prices peaked. Gross, who was named fixed-income manager of the decade in January 2010 by Morningstar Inc., said May 10 that fixed-income returns will probably be in the range of 2 percent to 3 percent. U.S. bonds lost 3.35 percent in 1994 as then-Federal Reserve Chairman Alan Greenspan surprised the market by doubling benchmark lending rates in 12 months.
The yield on Bank of America Merrill Lynch’s U.S. Broad Market Index, which includes Treasuries, corporate debt and mortgage bonds, fell below 1.58 percent on April 29. Yields on 10-year U.S. Treasury notes fell to 1.61 percent on May 1, the least since December. The yield dropped to a record low of 1.38 percent in July 2012. The yield fell to 1.87 percent today.
The $292.9 billion Total Return Fund Total Return fund managed by Gross returned 63 percent over the past year, beating 90 percent of its peers, according to data compiled by Bloomberg. It has lost 0.4 percent in the past month.
Pimco, a unit of the Munich-based insurer Allianz SE, managed $2.04 trillion in assets as of March 31.