This is just one more bubble and the dollar will be bad toilet paper very soon.
Related article: Interview: Peter Schiff still grim on future
Dec. 10 (Bloomberg) — Bill Gross, manager of the world’s biggest bond fund, said the U.S. Treasury market is overvalued, with sectors such as bills taking on “bubble” like characteristics.
“Treasuries have some bubble characteristics, certainly the Treasury bill does,” Pacific Investment Management Co.’s Gross said in a Bloomberg Television interview from Newport Beach, California. “A Treasury bill at zero percent is overvalued. Who could argue with that in terms of the return relative to the risk? There is no return.”
The Treasury sold $30 billion of four-week bills yesterday through an auction at zero percent, while three-month bill rates turned negative for the first time since the U.S. began selling the debt in 1929.
Gross expects the Federal Reserve to cut its target rate to 0.5 percent when policy makers meet next week and will likely signal that interest rates will remain low for a “considerable” period of time.
“There’s some risk” for the dollar to weaken, said Gross. “Certainly the government and the Fed cannot continue to talk about trillions of dollars of expansion of the Fed’s balance sheet without the risk of the dollar going south. It is fair to say other economies are doing much the same thing. The dollar doesn’t have to go south if all the economies reflate at the same time.”
Gross’ Total Return Fund lost 2.1 percent in the three months through Sept. 30, compared with a 0.49 percent slump by the benchmark it uses to measure performance, according to Pimco’s Web site. Mortgage securities and investment-grade corporate debt accounted for 93 percent of its holdings.
Pimco, a unit of Munich-based Allianz SE, has about $790 billion in assets under management.
To contact the reporters on this story: Michael J. Moore in New York at firstname.lastname@example.org.
Last Updated: December 10, 2008 14:44 EST
By Kathleen Hays and Michael J. Moore