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News & ResearchFinal Thoughts On US Treasuries

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Bill Gross, the co-Chief Investment Officer of Pimco, and manager of the world's largest bond funds, has weighed in on recent central bank action with a Tweet.

He said via Pimco's Twitter account Monday night: "Central banks are where bad bonds go to die." 

His comments come just a week after Pimco revealed that it had pared back holdings of US government bonds in Gross's flagship bond fund to just 21% at the end of August from 33 percent at the end of July.

From my viewpoint, the way I see things is this:

1. You can now lock into a projected negative real return (where the yield from the bond is less than inflaton) by buying US Treasuries maturing at any time up to 2, 5, 7 or 10 years;

2. Or a zero real return for 20 years if you like;

3. One major credit rating agency (S&P) has downgraded US Treasuries and the other (Moody's) has said it is inclined to follow suit;

4. The US dollar has now lost a major element in maintaining its ability to remain strong against other currencies - monetary 'tightness' - as the latest Quantatitive Easing programme is unlimited in time and scope. 

... By the way ... a weak dollar, increased money in circulation, inflation and negative real returns in the bond market have all, historically, been good for the price of gold. 



Sunday September 23, 2012 by Robin Newbould