Bear market for bonds has arrived, Gross says

10-year Treasury rate's move above 2.5% confirms outlook for fixed income, legendary bond manager says.
JAN 11, 2018

Oprah Winfrey's Golden Globe Awards pronouncement that "Time is up" for men who oppress women also goes for the bond market that's been buoyed by repressed interest rates, according to Bill Gross. "Bonds, like men, are in a bear market," Mr. Gross, manager of the $2.2 billion Janus Henderson Global Unconstrained Bond Fund, wrote in an investment outlook released Thursday. "Oprah shouted, 'Their time has come.' The bear bond market's time has come as well. Many would say, including yours truly — 'It's about time.' " The end of a 35-year bond bull market may have been July 2016, when yields on 10-year Treasury bonds hit an all-time low in a "double-bottomed" pattern, although it wasn't apparent at the time, according to Mr. Gross. The bear market was confirmed this week as rates on the 10-year passed 2.5%, he tweeted on Tuesday. Other bond managers say yields have to climb higher to enter bear territory. Guggenheim Partners' Scott Minerd said in email that the bull market remains intact unless the 3% level is broken, adding that even then the lows could be retraced again before "a generational bear market" starts. According to Mr. Gross, yields are likely to climb to at least 2.7% by year-end. The driving forces include global economic growth, the U.S. Federal Reserve raising its benchmark rate and other central banks reducing quantitative easing policies of buying sovereign debt to repress rates. (More: 2018 outlook on bond investing calls for change)

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