Bill Gross, who pioneered the “total return” strategy in the 1980s that revolutionized the bond market, says the approach is now defunct.

Instead of just picking up steady interest payments like his peers did at the time, the co-founder of Pacific Investment Management Co. created the firm’s Total Return Fund in 1987 to take active positions in duration, credit risk and volatility. The idea is that more than just clipping coupons, bond investors can also benefit from capital appreciation as bond prices rise and yields fall.

In an outlook published Thursday, Gross noted that what’s different now is that yields are much lower than when he first coined the concept, leaving investors with less room for price appreciation. At about 4.6%, the 10-year Treasury yield compares with a peak of almost 16% in 1981.

Instead of falling as bond bulls expect, 10-year yields are likely to rise above 5% over the next 12 months because the government is flooding the market with debt, Gross wrote. The US is so addicted to debt that it requires the government to increase the amount of Treasuries outstanding by up to a net $2 trillion a year to keep the economy humming, he added.

“Those that argue for lower rates have to counter the inexorable upward climb in Treasury supply and the likely Sisyphean decline in bond prices,” Gross, who retired from the money-management business in 2019, wrote. “Total Return is dead. Don’t let them sell you a bond fund.”

Over nearly three decades, Gross built the Pimco Total Return Fund into the world’s largest bond fund at its peak and cemented his reputation as the bond king. He was ousted from Pimco in 2014 after falling out with other executives.

This article was provided by Bloomberg News.