Salient to Investors:
Bill Gross at Pimco said:
- Bond yields and risk spreads were too low 2 months ago and global markets that were too leveraged are now reducing risk
- The Fed tilted over-risked investors to one side of an overloaded and over-levered boat when discussing tapering, so don’t panic.
- The majority of global economies, including the US, are not sinking: markets just had too much risk and too much hope for a constant QE and for the growth that it would produce.
- Investors who are selling US government debt now are missing the influence of inflation on the Fed’s decisions – the market basically misinterpreted the growth and unemployment targets while leaving out inflation targets going forward.
- We may have reached an inflection point of low Treasury, mortgage and corporate yields in late April, but this is overdone.
Bond-fund managers from Gross to Jeffrey Gundlach at DoubleLine Capital say it is a bad time to sell bonds because the economy is not strong enough to sustain higher borrowing costs.
US-listed bond mutual funds and ETFs saw record monthly redemptions through June 24.
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