Thursday, March 10, 2011

Bill Gross: US Treasury Bonds "most overvalued"

The fools in Congress are pushing us closer and closer to a debt crisis. Each passing day leaves us with less margin of safety. We are closer to a vicious circle of higher interest rates - greater debt service - bigger deficit etc etc etc.

Citing the Federal Reserve's own analysis, Gross says QE2 has lowered Treasury yields by at least 0.5% on debts maturing in 5-, 10- and 30-years. Whether rates will rise by that much (or more) when QE2 ends remains to be seen; but Gross doesn't recommend sticking around to find out.

"It becomes a question of musical chairs to a certain extent: who gets out first and who's the last one looking for a chair on June 30," he says.