Bill Gross Predicts a Possible 5% Testing for the 10-Year Treasury in the Near Future

Renowned investor Bill Gross predicts that Treasury yields could potentially skyrocket in the near future.

“I think we’re gonna go to five percent,” stated Gross in an interview on CNBC’s “Last Call” on Tuesday, referring specifically to the 10-year Treasury yield. “The market is currently oversold in anticipation of increased Treasury supplies and expectations of the Fed keeping interest rates high for a longer period.”

The stock market experienced a sharp decline on Tuesday due to the surge in bond yields, unsettling Wall Street. The S&P 500 dropped by 1.4%, hitting its lowest point since June. This was driven by the 10-year Treasury yield reaching its highest level in 16 years.

Over the past month, the benchmark yield has spiked to 4.8% after the Federal Reserve pledged to maintain higher interest rates for an extended period. On Tuesday, the 30-year Treasury yield also rose to 4.9%, its highest since 2007.

“I think maybe 5% will be the limit for the near term. However, this is subject to factors such as inflation and economic growth,” commented Gross, who is a former chief investment officer and co-founder of Pimco.

Billionaire investor Ray Dalio also expressed on Tuesday that the surging 10-year rate might reach 5%, as he anticipates sustained inflation.

Gross, formerly known as the bond king, believes that the Federal Reserve’s aggressive rate hikes since March 2022 have had a significant impact on the yield curve. The central bank has increased interest rates to their highest level since early 2001.

Gross highlighted that investors are currently grappling with the negative consequences arising from a deepening Treasury deficit.

“What we’re witnessing is an acknowledgement of a Treasury deficit exceeding $2 trillion, which is affecting the long-term market. Additionally, the recent days have seen the selling of ETFs primarily owning long bonds, as opposed to short bonds,” Gross explained.