Bill Gross has been the chief proponent of the idea that the end of QE2 will lead to a spike in interest rates, thus justifying his bet against US Treasuries.
Well, maybe not.
Gross: End of QE2 may or may not lead to higher yields, but what is clear is that a 1.79% 5 yr offers a negative real yield after inflation.
So that’s different. He doesn’t like the deal he’s getting on a 5-Year Treasury, considering the inflation environment. And that’s fine. But it’s not the same as yields exploding when the bond buying is done, and if even he doesn’t think yields will shoot up, people should probably stop using the argument that it’s only the Fed keeping yields down, and causing a sovereign credit rout in the US.