Renowned bond investor Bill Gross predicted on Monday that U.S. economic growth will slow to 2 percent in 2015 due to the decline of oil prices, and that the 10-year yield will hover around the 2 percent level.
“I think high quality bonds are a safe bet, just not a high returning bet, ” Gross told CNBC. “Yes, we’re starting from a 3 percent growth economy that will probably persist for another quarter or so, ” he said. “We get back to a relatively new structural growth rate, which is not 3 but probably 2 or even less.”
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Gross attributed the decline to falling oil prices, which in turn affects industries such as fracking. Oil’s slide also “determines currency movements, ” setting off a chain reaction. “Then financial markets try and readjust, ” he said. “Hedge funds reduce leverage and sell other positions.” The noted bond investor said it would be “very difficult” for oil prices to stabilize.
He also expected the 10-year yield to hold near 2 percent. “I think high quality bonds are a safe bet, just not a high returning bet, ” Gross said.
The veteran bond guru, who founded the Pacific Investment Management Company, joined Janus Capital Group in late September.
On Tuesday, the collapsing oil market spurred a fresh wave of safe-haven bids for U.S. government debt, sending the 30-year yield to its lowest in more two years as investors worried about how the plunge in crude prices might harm the global economy, Reuters said.
