Bill Gross, manager of the Janus Global Unconstrained Bond Fund, said yields on German government debt have reached a bottom.
“Obviously the volatility in the last three weeks, the 50 basis point increase was a surprise to everyone, a surprise to me,” he said in an interview on Bloomberg Radio with Tom Keene and Michael McKee. Yields on 30-year U.S. Treasuries between 55 and 75 basis points imply the European Central Bank “is going to be on hold at zero for the next 30 years.”
European sovereign debt has tumbled in recent weeks, sending yields on 10-year German bunds to their highest levels this year. Just before the selloff, Gross said in an April 21 Twitter message that 10-year German bunds were the “short of a lifetime.” BlackRock Inc.’s Rick Rieder said in an interview that his firm is betting against longer-dated German debt.
“Bunds were crazy high before and they’re still too high today,” Rieder said Friday in a Bloomberg Television interview.
Gross, who manages the $1.5 billion Unconstrained fund at Janus Capital Group Inc., wagered that German bunds would trade in a narrow range for the time being, instead of betting all-out against them as he had recommended. The trade may have hurt Gross when bunds slumped more than he anticipated, Bloomberg News reported on May 6, based on fund data as of March 31.
Gross’s fund, which beat peers in March and did well most of April, declined amid the selloff in European bonds. The fund has lost 2.4 percent in the past month, according to data compiled by Bloomberg.
“The bund trade that I suggested three weeks ago as the best short of a lifetime certainly worked out for Janus, and some of the other pieces didn’t necessarily work out,” Gross said in the interview on Friday, without specifying any details of his trade in his mutual fund.
Gross’s bond fund gathered an estimated $57.7 million in new investor money in April, according to data compiled by Bloomberg. The co-founder of Newport Beach, California-based Pacific Investment Management Co. joined Denver-based Janus last year after losing a power struggle at the firm he helped build into a $2 trillion money manager at its peak.