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"I think we have fake markets," Gross said at a Janus Henderson
event. Investors should brace for higher Treasury bond yields as
the Fed begins to unwind its quantitative easing program but
yields will edge up "only gradually," he said.
Gross, who oversees the $2.1 billion Janus Henderson Global
Unconstrained Bond Fund, said the Fed's loose monetary policy
had resulted in investors chasing yield and thus producing tight
corporate spreads everywhere around the globe.
"Even China and South Korea - perfect examples of the risk trade
- are at very narrow (corporate spread) levels. There is no real
advantage in the global marketplace. Everything is so tight, it
is hard to pick a winner from a group that is fake."
Gross reiterated his warning that Fed Chair Janet Yellen and
other global policy makers should not rely on historical models
such as the Taylor Rule and the Phillips curve "in an era of
extraordinary monetary policy."
Economists John Taylor and A.W. Phillips devised models for
guiding interest-rate policy based, respectively, on inflation
and the unemployment rate. Those models disregard the importance
of private credit in the economy, according to Gross.
(Reporting by Jennifer Ablan; Editing by Andrew Hay and Tom
Brown)
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