Why Gross Thinks Global Investors Will Rush toward US Treasuries
Gross on the Fed’s rate hike
On March 15, 2017, the Fed announced its much-awaited interest rate hike—the first rate increase on 2017, and the third rate hike in a decade. The FOMC (Federal Open Market Committee) hiked the federal funds rate by 0.25% on March 15, bringing the rate up to the range of 0.75%–1% on March 15, 2017.
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As the Fed moves toward a gradual, continued rate hike process, it’s important for investors to keep an eye on the other central banks, such as the ECB (European Central Bank) or the BoJ (Bank of Japan). According to Bill Gross, the divergence in monetary policies are attracting global investors toward the US Treasury (BND) (TLT) (SHY).
Bill Gross on the bond market
Billionaire investor Bill Gross stated the following on the matter: “Once [ECB President Mario] Draghi begins to taper…and reduce that $80 billion a month, [and] once that zero to 10 basis point cap is eliminated in Japan, then hell could break loose in terms of the bond market on a global basis.”
Specifically, Gross pointed out that this divergence in monetary policy could be a major problem for the global bond market. Falling yields and negative yields in various countries are major concerns for investors.
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