One day after Bill Gross declared the end of the 25 year bond bull market…
Gross: Bond bear market confirmed today. 25 year long-term trendlines broken in 5yr and 10yr maturity Treasuries.
— Janus Henderson U.S. (@JHIAdvisorsUS) January 9, 2018
… because when looking at the 10Y chart the yield had risen above the resistance trendline…
… this morning Gross doubled down, and following the sharp spike in yields this morning, when a Bloomberg report that China may boycott future TSY purchases sent yields as high as 2.59%, the Janus bond manager told Bloomberg Radio said that “we’ve gone short bonds” in the unconstrained fund and echoing Jeff Gundlach’s Tuesdy webcast, said that “I’ve gone rather negative on high yield bonds too.”
Commenting on today’s report, Gross aid that there is “recent evidence showing that China is liquidating treasuries”, and predicted that the 10Y yield could reach 2.7%-2.8% by year end.
The reason for the weakness, again, is the same as the catalyst behind Gundlach’s own bearishness: namely that central bank treasury purchases are close to an end, although he caveated by saying that “I don’t think we’re headed for investment armageddon” and clarified that the “bear market” he envision in bonds, “is a mild one.”
The last time Gross went so publicly bearish bonds was on April 21, 2015, when he successfully turmoiled the German Bund, which tantrumed higher by 50 bpsand led to a quick and painful VaR shock.
Will Gross – and Gundlach… and China – succeed in unleashing VaR shock 2.0, sending yields surging, and put the Fed’s tightening plans on hold for the second time?