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Why Bill Gross is shorting bonds

Why Bill Gross is shorting bonds

Veteran investor Bill Gross has said he is shorting bonds in his Janus Henderson Global Unconstrained Bond fund.

In an interview with Bloomberg Radio, Gross reaffirmed his belief bonds are in a difficult position and highlighted his short positions in the market.

However, the long-standing market commentator said the situation isn't 'investment Armageddon'.

‘We’ve gone short bonds, not just treasuries but short gilts and bunds, we’ve left the JGB (Japanese government bonds) market alone but it appears that it’s a treasury phenomenon and treasury directive.

‘I have also gone rather negative on high yield bonds and credit spreads because as yields rise, zombie-like corporations pay higher yields and their spreads are compressed and their cover is compressed'

Boom time for bonds

Despite shorting the asset, Gross said it’s been a wonderful period of time since 1981 for bonds.

‘Bonds have come down, carry, total return, put it all together and the investment world is happy, now at this point, it appears that the market and institutions are over levied carry.

'Anything that is carry – and let’s face it risk assets, bonds and currencies are in many cases carry dominate, then they could be at risk.

‘This is not Armageddon for me, it’s a mild increase, but it basically signifies that the bull market for 25 years is over and we should look forward to periods of low total return.’

As Gross shorts bonds, Morgan Stanley’s strategists Matthew Hornbach and Guneet Dhingra, countered his previous bear market call.

Writing in an investor note, the team urged investors not to worry about treasury markets. ‘Don’t worry, treasuries continue to offer value. This isn’t the bear market you’re looking for.’

Bitcoin bonanza

Elsewhere, this week Gross has also said that cryptocurrency Bitcoin is fuelling investment talk. Gross told Bloomberg that many people had approached him on the topic.

‘Lots of people and especially my donut girl that I stop by at 5.30 in the morning every day, not only does she ask me but I ask her. She told me that she had invested in Bitcoin and so that’s sort of like the shoeshine boys in the 30s or the taxi driver, perhaps that’s a sign.

‘I am a believer in blockchain technology, I don’t know how it applies to a price in Bitcoin, but none the less it’s all around the public and the streets,’ he added.

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