Pimco Chief Changes Mind on Treasuries

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said the rise in debt yields over the last three months had made U.S. Treasuries more attractive again.

Gross on April 1 recommended that investors buy “anything but Treasuries” on expectations that faster economic growth would push yields higher and prices lower for existing debt.

Since then, two-year Treasury note yields surged 1.11 percentage points and 10-year yields climbed 0.77 percentage point as speculation grew that the Federal Reserve would begin a series of interest rate increases starting June 30.

“We’ve come to a point where there is more value in the U.S. market,” Gross said in an interview at his Newport Beach office. “It doesn’t suggest that the bear market is over, but it does suggest” investors are paying prices for bonds that reflect “gradual Fed rate increases, or even more.”

Gross said he favored shorter-term Treasury securities.

Interest rate futures have “correctly anticipated” that the Fed would raise its target interest rate for overnight lending between banks to 2.5% or 3% over the next 12 months, the bond-fund manager said.

Pimco has almost $400 billion in assets under management and is owned by Allianz, Europe’s biggest insurer.