Bill Gross: bearish on bonds

Investment guru Bill Gross sees tough times ahead for corporate bonds.

Bill Gross, the co-founder of PIMCO and now the manager of Janus Global Unconstrained Bond Fund, is increasingly bearish on the outlook for bond markets. In part, that's because the US Federal Reserve is likely to start hiking rates this month. The Fed still has some flexibility "there's no significant inflation", he tells Bloomberg.com. But if it's too slow in raising rates "then ultimately five, ten, 15 years down the road, savings, investment and the economy... suffer".

This is likely to be bad news for corporate bonds, which have rallied strongly in recent months. Central-bank actions, such as quantitative easing and negative interest rates, have pushed bond values up to artificially high levels a state of affairs that he likens to a "Ponzi scheme".

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