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Bill Gross slams central banks’ ‘desperate gamble’

by Chris Sloley on Dec 03, 2013 at 14:41

Bond wars scenario

Referencing a previous outlook, Gross said, given the Federal Reserve’s efforts to artificially lower yields and elevate bond prices, should lead fixed income investors to underweight duration and perhaps overweight other carry alternatives.

He said this strategy will help to weather any volatility created when, as he predicts, QE comes to an end over the next year under the watch of new Federal Reserve chair Janet Yellen.

‘The taper will lead to the elimination of QE at some point in 2014, but the 25 basis point policy rate will continue until 6.5% unemployment and 2.0% inflation at a minimum have been achieved.’

‘If so, front-end treasury, corporate and mortgage positions should provide low but attractively defensive returns. We have positioned our bond wars portfolio – heavily front-end maturity loaded along with credit, volatility and curve steepening positions.’

To read the whole of Bill Gross’s latest Investment Outlook, entitled On the Wings of an Eagle, please click here.

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