Thursday, December 11, 2008

Bill Gross Says T-Bill At Zero Is Overvalue And Has No Returns

Here's Bill Gross commentary on the US T-Bill on Bloomberg.

  • Pimco’s Bill Gross Regrets Not Buying Treasuries Amid Rally

    By Kathleen Hays and Michael J. Moore

    Dec. 10 (Bloomberg) -- Bill Gross, manager of the world’s biggest bond fund, says he regrets not buying Treasuries in what is shaping up to be the best year for U.S. government debt since 2000.

    “If we had our druthers, if we went back 12 months and we had known then what we know now, it would have been all invested in Treasuries,” Pacific Investment Management Co.’s Gross said in a Bloomberg Television interview from Newport Beach, California. “The question going forward is ‘Is it the winner over the next 12 to 24 months?’ We don’t think so.”

    Gross’ $129.5 billion 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. The Total Return Fund has not held Treasuries since last December.

    Treasuries of all maturities have returned 11.9 percent this year, according to Merrill Lynch & Co.’s U.S. Treasury Master Index, the best performance since the securities gained 13 percent in 2000.

    Gross said he continues to invest in corporate debt that is backed by the U.S. government, including the debt of American Express Co. and Sallie Mae Inc. The 64-year-old money manager also said Treasury Inflation Protected Securities represent “one of the best values” for investors seeking high-quality debt “once this delevering process winds down.”

    ‘Bubble Characteristics’

    “Treasuries have some bubble characteristics, certainly the Treasury bill does,” Gross said.
    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.”

    Pimco, a unit of Munich-based Allianz SE, has about $790 billion in assets under management. The Total Return fund has gained 4.63 percent over the last five years, ranking it among the top one percent of all comparable funds, according to Bloomberg data.


See also: Zero! US T-Bills Fall To Zero! and Tips: How To Make 13 cents In 3 Months!!!!