The ratio of normalized volatility on three-month options, known as swaptions, for five-year interest-rate swaps relative to similar contracts on 10-year swaps reached 1.03 on Sept. 5, from a low this year of 0.57 in May.

In these deals two parties agree to exchange fixed for variable-rate interest payments based on a benchmark index such as the London interbank offered rate, or Libor, over a set period. The higher the number, the greater the volatility.

Gross Recommendation

Given the Fed’s guidance on the future path of interest rates and low volatility, one of the favorite trades among investors has been to buy five-year notes and hold them until they had two years or less left or maturity. Even with rates so low, investors would earn profits as yields fell over time to match current maturities and bond prices rose.

Gross, who runs the world’s biggest bond fund, the $251 billion Total Return Fund, reiterated on his website earlier this month advice from February that investors should buy five- year Treasuries. The difference between five- and 30-year yields may increase by 10 basis points, Gross wrote on Twitter after Summers announced his withdrawal.

Treasuries due in five years have lost 3.2 percent in 2013, the most since 1994, Bank of America Merrill Lynch index data show.

Traders have increased bets to the most since 2008 that the securities will continue to fall. Hedge-fund managers and other large speculators boosted their net-short position in five-year note futures in the week ending Sept. 10 to 128,756 contracts, according to U.S. Commodity Futures Trading Commission data.

Fund Losses

Gross, whose firm is based in Newport Beach, California, has seen his Total Return Fund lose more than $41 billion, or 14 percent of its assets, during the past four months through losses and investor withdrawals, according to Chicago-based researcher Morningstar Inc. Mark Porterfield, a spokesman for Pimco, didn’t respond to requests for comment.

Five years after Lehman Brothers Holdings Inc.’s bankruptcy filing on Sept. 15, 2008, intensified the worst financial crisis since the Great Depression, gross domestic product is forecast to expand 2.7 percent next year according to a Bloomberg survey, the fastest rate since 2006. The unemployment rate fell last month to 7.3 percent, from 7.8 percent in December.