2024-01-09 15:05:29
The US debt market has experienced significant volatility in recent years, with shifting expectations for interest rates and government bond yields. Bill Gross, founder of Pacific Investment Management Co., known as the “bond king” in the US, has weighed in on the current state of the market, claiming that US 10-year bond yields are overestimated at 4%. He believes that the market is pricing in interest rate cuts too quickly compared to the Federal Reserve’s actual trajectory.
Gross also stated that he prefers to stay away from investing in long-term government bonds that are not indexed, instead focusing on 10-year inflation-linked bonds (TIPS) that currently yield a return of 1.8%. His warning about the overvaluation of the 10-year US government bond could serve as a significant indicator for investors.
The US debt market has experienced significant ups and downs in the past year, with government bond yields reaching 16-year highs before plummeting in response to signals from the Federal Reserve about the end of interest rate hikes and the convergence of inflation to the central bank’s target areas.
However, recent weeks have seen a change in trend, with US government bond yields climbing again to 4% after the Fed sent hawkish messages and cooled investors’ enthusiasm. Bank Hapoalim explained that strong labor market data in the US is expected to continue driving government bond yields higher.
The market currently estimates that there will be at least 5 interest rate cuts in 2024, bringing the interest rate to a level between 4.00%-4.25% by the end of the year. The Fed’s decisions will continue to be based on data, especially inflation and labor market data.
Gross’s warning about overvalued bond yields and his preference for TIPS may provide valuable insight for investors navigating the volatile US debt market. With his track record of success in predicting market movements, Gross’s perspective is one to take seriously as investors navigate the ever-changing landscape of the US debt market.
#King #Bonds #profitable #investment #American #debt #market