Bill Gross had a great call.
But it looks like he didn’t make any money from it.
Back in April, Gross said that shorting the German 10-year Bund, or betting that the yield on the Bund would rise, was the “short of a lifetime.” The catch is that Gross said investors should wait until the European Central Bank is done with its quantitative easing program, which is set to run through September 2016.
In the last couple weeks, however, the yield on the 10-year Bund has exploded higher, rising from around 6 basis points, or 0.06%, to 55 basis points, or 0.55%, a roughly 900% increase!
And so basically, Gross nailed this call. So you’d think this worked out well for Gross? Well, it doesn’t seem like it.
According to a report from Bloomberg’s Miles Weiss, it looks like Gross wagered that the Bund was trade in a narrow range in the interim.
Instead, the Bund has been extremely volatile, spiking dramatically higher, and causing Gross to likely lose money.
Weiss notes that Gross’ Unconstrained Bond Fund at Janus Capital has lost 2.1% since he first mentioned the Bund short.
In September 2014, Bill Gross left PIMCO, the money management firm he founded, and joined Janus Capital. Gross’ final years at PIMCO were clouded, among other things, by simply being wrong on what Fed policy would do to Treasury bonds. Gross long held that Fed policy would be inflationary and lead to yields rising: inflation has been nowhere to be found and yields have declined.
And even now, when Bill Gross wins, he can’t win.
Here’s the chart of Bund yields, and Gross’ big call right near the bottom.