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.”
Will you offer us a hand? Every gift, regardless of size, fuels our future.
Your critical contribution enables us to maintain our independence from shareholders or wealthy owners, allowing us to keep up reporting without bias. It means we can continue to make Jewish Business News available to everyone.
You can support us for as little as $1 via PayPal at firstname.lastname@example.org.
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.