Bill Gross Advises Buying T-Bills to Bet Debt-Ceiling Issues Will Be Resolved
Bill Gross, the former chief investment officer of Pacific Investment Management Co., recommended buying short-term Treasury bills, expecting the debt-ceiling issue eventually gets resolved.
“It’s ridiculous. It is always resolved, not that it is a 100% chance, but I think it gets resolved,” Gross said on Bloomberg Television’s ETF IQ Monday. “I would suggest for those who are less concerned, similar to myself, that they buy one-month, two-month Treasury bills at a much higher rate than they can get from longer-term Treasury bonds.”
Rates on short-dated bills have soared ahead of the so-called ‘X-date’ early next month, after Treasury Secretary Janet Yellen warned last week that the government could run out of cash as soon as June 1. Anxiety that Congress will fail to lift the debt ceiling on time has manifested in the highest yields ever at last week’s four- and eight-week bill auctions, while Monday’s three-month sale offered the loftiest rate since 2001.
But such dislocations have been a common feature of previous episodes of debt-cap angst, which have always been worked out, Gross said.
“The problem in the past has resulted in Treasury bill rates close to the point of potential default, moving higher by 50 or 100 basis points,” Gross said. “They have done that this time.”