Suddenly, Bill Gross’ short bet against Treasuries is not only looking wrong, but also unpopular.
Remember, on April 11, it was revealed that Gross went short Treasuries on the basis that the end of QE2 would lead to a surge in yields.
There was a logic to the Gross thesis, but there was also a strong counterpoint: QE2 boosted risk assets, and we saw yields rise. The end of QE2 could easily lead to the opposite: a bear market in risk assets, and the return of Treasury strength.
And now that’s the thesis of several bond managers.
WSJ reports that several investors are going long Treasuries on the end of QE2.
Russ Certo of Gleacher & Co. puts it this way: “As a bond investor, I want a hawkish central banker because he’s protecting my cash flows… QE2 was not good for Treasurys.”
Obviously these opinions are meaningless, because the adjudicator will be the market itself, but it is interesting that even Bill Gross has been showing signs of wavering lately, saying on Friday that he could go long Treasuries again if the economy wavers.
Bottom line: What was once conventional wisdom (the end of QE2 is bad for Treasuries) is being challenged left and right.
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