Tags: Gurtin | avoid | Treasurys | Fed

Bond Fund Manager Gurtin: Avoid Treasurys Like the Plague

Friday, 02 Nov 2012 10:09 AM

By Dan Weil

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You can add Bill Gurtin, CEO of Gurtin Fixed Income, to the list of bond fund managers who are extremely bearish on Treasurys.

That list includes probably the two biggest stars in the fixed-income space — Bill Gross of Pimco and Jeff Gundlach of DoubleLine Capital. Gurtin, like the others, thinks Treasury investors are addicted to the Federal Reserve’s quantitative easing (QE).

"We're all complacent about what the Fed is doing," he said at a recent conference, according to CNNMoney. "People have jumped aboard QE3 feeling like it's a pretty smooth trip … but there's no port for this huge boat to land on."

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

Once QE ends, Treasurys could drop like a stone. “People don’t understand what they own,” Gurtin said.

The 10-year Treasury yield has dropped to 1.71 percent Thursday from 16 percent in 1981. “Returns like that are unsustainable," Gurtin noted.

The yield hit a record low of 1.38 percent in July.

Gurtin doesn’t claim to know when rates will rise. "I only know that we're closer than we've ever been," he said.

Therein lies the rub. Gross thought we were pretty close early last year and dumped all the Treasurys from Pimco Total Return, the world’s largest mutual fund. Treasurys proceeded to soar. Gross suffered sub-par returns and later had to buy Treasurys back.

Betting against Treasurys has been an easy way to lose money since the financial crisis began in 2008. So be careful about doing so.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

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