Bill Gross likes TIPS.
Jeff Gundlach thinks TIPS are for losers.
In an interview with CNBC on Monday, Janus Capital’s Bill Gross said that TIPS, or Treasury Inflation-Protected Securities, are an investment that looks particularly attractive right now.
TIPS are inflation-protected because though their yield is considerably lower than a regular 10- or 30-year Treasury bond, the principal paid back at maturity is inflation-adjusted.
The comment from Gross, however, presents an interesting juxtaposition with an opinion offered last week by another bond guru, Jeff Gundlach.
On his latest webcast, Gundlach said bluntly: “TIPS are for losers.”
Basically, TIPS are a bet that inflation will rise, thus making the receipt of paltry interest payments worth it in order to receive a larger, inflation-adjusted repayment upon the bond’s maturation.
Gundlach doesn’t see inflation anywhere, and so his view that TIPS are a pointless investment would be sound under that framework.
And now there is the disagreement over TIPS.
Gross and Gundlach met about potentially joining forces as Gross got prepared to leave PIMCO, which he left for Janus back in September, and maybe it’s for the best they didn’t.