US Bond Prices and Bill Gross: Pimco’s Gross Regrets ‘Mistake’ on US Debt Call

ARLINGTON, VA - JANUARY 13:  Federal Reserve C...
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If an investment strategy relies on an accurate forecast of the future it will eventually fail. Eventually even the most famous traders will get it wrong. Your retirement plan is far too important to risk it on forecasters.

Bill Gross, manager of the world’s largest bond fund for Pimco, has admitted that it was a mistake to bet so heavily against the price of US government debt.

Mr. Gross emptied his $244 billion Total Return Fund of US government-related securities earlier this year in a high-profile call that has backfired as the bond market has rallied. As of Monday, Pimco’s flagship fund ranked 501th out of 589 bond funds in its category.

“Do I wish I had more Treasurys? Yeah, that’s pretty obvious,” Mr Gross told the Financial Times last week, adding: “I get that it was my/our mistake in thinking that the US economy can chug along at 2 percent real growth rates. It doesn’t look like it can.”

When the yield on the 10-year Treasury [US10YT=XX  2.184    -0.06  (0%)   ] was 3.5 percent in January, Mr Gross warned that the risk of rising inflation made government debt a poor investment.

Bond prices move in the opposite direction to bond yields, which he forecast would rise as Ben Bernanke, chairman of the Federal Reserve [cnbc explains] , brought the second program of bond buying, known as quantitative easing [cnbc explains] , to an end in June.

Investors saving for retirement should not rely on active managers to predict where the market is going. No matter how long the track record, even the best will fall in the long run.

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