Bill Gross’ PIMCO is short Treasuries, and he’s been very vocal about this idea that interest rates will rise once QE2 ends because, well… who’s going to be there to buy the bonds?
There’s just one teeny problem.
As this chart from rival bond manager Jeff Gundlach (via ZeroHedge) makes clear the pattern is exactly the opposite of what Gross suggests. When QE is happening, yields rise. When there’s no QE, yields fall. It seems illogical, unless you think of it, as we’ve urged like this: QE raises the appeal of risk assets. When there’s no QE, the appeal of risk-less assets (bonds) rises.