Mish
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More interesting to me was Friday's action of bonds up big and the market was down substantially.
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Any thoughts or comments on this thinking?
I thought, with the rest of the world raising rates
we would have no choice but to raise them in August.
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PIMCO's Gross Says Bear Market in Bonds Has Ended
July 7 (Bloomberg) -- Bill Gross, chief investment officer at Pacific Investment Management Co. and manager of the world's biggest bond fund, said the bear market in bonds is over.
``The bond bear market is beginning to go into hibernation, which is the same thing as saying the bear market's over,'' said Gross in a television interview from the firm's headquarters in Newport Beach, California. ``It ended two days ago on Wednesday. While we're not about to reap huge capital gains, bonds will do better from here in terms of price.''
Gross spoke after the Labor Department said the U.S. economy added fewer jobs in June than economists forecast, reducing the urgency for further Federal Reserve interest-rate increases even as wages rose the most in five years. The Fed has raised the target overnight lending rate between banks 17 straight times since June 2004, to 5.25 percent.
``As we near the end of a Fed cycle, the economy starts to slow down and that is indicated not only by this payroll number, but the last two before that,'' he said. ``I think the Fed is about done at 5.25.''
Gross, 62, since the middle of last year has said the Fed would likely stop raising interest rates. Fed policy makers lifted the rate seven times from 3.5 percent in August.
The 121,000 gain in payrolls followed a 92,000 rise in May, the Labor Department said today in Washington. Hourly earnings rose 3.9 percent from a year ago and the unemployment rate stayed at 4.6 percent, an almost five-year low.
U.S. Treasuries handed investors a loss of about 1.2 percent in the first half of this year, the biggest drop since 1999, according to Merrill Lynch & Co. indexes.
``Treasuries relative to everything are yielding much less than they should in our opinion,'' Gross said.
Yield Curve
Yields on benchmark 10-year notes declined 5 basis points or 0.05 percentage point, to 5.13 percent in New York today, according to bond broker Cantor Fitzgerald LP. Yields on two-year notes were higher at 5.17 percent, creating a so-called inverted yield curve, which suggests investors are expecting an economic slowdown.
When the economy begins to recover, ``you'll see that relationship start to reverse and two's go lower than 10's,'' Gross said. Yields move inversely to bond prices.
The yield on the benchmark 10-year note has fallen since climbing to a four-year high of 5.25 on June 28.
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