The former bond king, Bill Gross, says 10-year Treasury is ‘overvalued’

The former bond king doesn’t like the fixed-income security that’s the lynchpin of the financial world.

Bill Gross, the retired fund manager and co-founder of Pacific Investment Management, took to the social-media service X to say that the 10-year Treasury
BX:TMUBMUSD10Y
is “overvalued” with a yield of 4%. Yields move in the opposite direction to prices.

Through Monday, the yield on the 10-year Treasury has fallen 99 basis points from its late October peak.

He said the 10-year Treasury inflation-protected yield at 1.80% is the better choice. “If you need to buy bonds. I don’t,” said Gross.

Gross also continued to talk of his idea to go long 2-year bonds
BX:TMUBMUSD02Y
while shorting the 10-year. “Stick with the return to a positive 10 year/2 year yield curve. Earns carry while you wait,” he said. In previous posts, he talked of making such trades via Treasury futures contracts.

Gross said he was taking a bow for his recommendation of regional bank stocks six months ago and mortgage REITs in December. The SPDR S&P Regional Banking ETF
KRE
has climbed 49% from its May 4 low, and the iShares Mortgage Real Estate ETF
REM
has gained 21% from its late October low. Gross in November highlighted Annaly Capital Management
NLY,
-0.61%
and AGNC Investment Corp.
AGNC,
-0.45%
as mortgage REITs he likes for 2024.

Gross said he still likes Capri Holdings
CPRI,
-0.28%
as a merger arbitrage target. Tapestry
TPR,
-1.25%
in August agreed to buy Capri for $57 per share, and on Monday, Capri closed at $50.49.

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