Comments from Pacific Asset Management Co. boss Bill Gross and his new adviser, former Federal Reserve chairman Alan Greenspan, are credited with shaking up the Treasury bond market.
Treasury volatility, as measured by a Merrill Lynch & Co. index, has registered a two-year high at 85.20.
Gross and Greenspan, known for their conflicting opinions during Greenspan’s time at the Fed, continue to be at odds on the topic of housing.
Last week Gross said the U.S. housing market is in a “bust,” which would be cause for the Fed to lower rates.
About a month ago Greenspan said housing was doing well despite the subprime market, which only is a small part of the market.
The two aren’t so far apart in other areas.
Gross has changed his bias after 25 years of being bullish on bond prices.
Last week, Gross said long-term Treasury bonds were headed to 6.5%. Soon after, the 10-year Treasury yield rose above 5.25%, the highest since 2002.
Two days ago in a speech in Mexico City, Greenspan said historically low long-term interest rates might not stay that way.
Pimco hired 81-year-old Greenspan on in May.
A division of German insurer Allianz AG, Pimco manages nearly $700 billion in assets.
Pimco’s Total Return fund is down almost 1% for the year to date.
But not all returns are bad. Last week Gross was also able to sell a rare British “Penny Black” stamp that he bought for $2.5 million for $9.1 million. The proceeds are to go to the charity Doctors Without Borders.
