NEW YORK, May 22 (Reuters) - Bill Gross, co-chief investment officer of bond giant PIMCO, said on Wednesday the U.S. Federal Reserve will likely begin tapering its monetary stimulus in September and that bond investors might have already anticipated the move.
“I think we’re looking at a potential tapering in the next few months and probably around September,” Gross, who is also a founder of PIMCO, told cable television network CNBC.
Gross, whose Pacific Investment Management Co had $2.04 trillion in assets at the end of March, said the rise in the benchmark 10-year U.S. Treasury yield has led him to suspect investors have already anticipated a pullback.
The yield on the 10-year Treasury was 2.03 percent at the close of trading on Wednesday, up 65 basis points from its intraday record low of 1.38 percent on July 25 of last year. Rising yields indicate falling prices.
The Fed is buying $85 billion in Treasuries and agency mortgage securities per month in an effort to lower borrowing costs and spur hiring. Fed Chairman Ben Bernanke told Congress on Wednesday the central bank could decide to scale back its stimulus at one of its “next few meetings” if the economy looked set to maintain momentum.
Gross, whose PIMCO Total Return Fund is the world’s largest mutual fund with $292.9 billion in assets, said there may be a bubble in 30-year Treasuries as a result of the Fed’s purchases.
“If anything, in the Treasury market, there’s a bubble in 30-year Treasuries,” Gross said.
Gross also said the stock market is “frothy” and cited data showing that companies are buying back $50 billion in equity shares per month. The benchmark S&P 500 is up 16 percent so far this year.