Having thrown in the towel on his bond bear market call two weeks ago, Janus Henderson’s billionaire bond investor Bill Gross now believes that the most recent bearish bond price (rise in yields) will stop here as the economy cannot support higher yields.
As Gross said two weeks ago, yields won’t see a substantial move from here.
“Supply from the Treasury is a factor in addition to what the Fed might do in terms of a mild, bearish tone for U.S. Treasury bonds,” Gross told Bloomberg TV.
“I would expect the 10-year to basically meander around 2.80 to perhaps 3.10 or 3.15 for the balance of the year. It’s a hibernating bear market, which means the bear is awake but not really growling.”
Since then, yields have tested the upper-end of his channel and are breaking out today to their highest since 2011 (10Y)…
and back to their critical resistance levels (30Y)…
Bill Gross thinks they won’t be right. He highlights the long-term downtrend over the past 30-years, which comes in a 3.22%.
“30yr Tsy long-term downward yield trendline for the past 3 decades now at 3.22%, only ~4bps higher than today’s yield.”
“Will 3.22% be broken to upside?” he asks.
“I don’t think so. The economy can’t support yields higher than 3.25% for 30s and 10s, nor 3% for 5s.
Continuing hibernating bond bear market is best forecast.”
Asa ForexLive also notes, if he’s right it doesn’t necessarily mean the US dollar will reverse right away but it would be a good sign for stocks and would limit how far the US dollar might run.
So, will Gross be right? Is this latest spike all rate-locks on upcoming IG issuance? And will this leave speculators with a record short position now wondering who will be the one holding the greatest fool bag by the end of the year…