It's not so good to be king, at least for now. Bill Gross' Pimco[profile] Total Return Bond Fund is on a two-month losing spree, reported the WSJ, making it the 12th worst performer of 177 similar bond funds. The fund returned 6.69 percent on average a year over the past 15 years compared with 5.49 percent annual return on Barclays Aggregate Bond Index.

Gross has tried to downplay the bad news and portray it as an opportunity, saying that the bond market selloff could present a buying opportunity for investors. Gross has also been criticizing the Fed chairman, and continued to pile on by penning a piece for Barrons. Gross writes that the Fed announcement shows Bernanke aware of the structural impediments facing the economy, but Gross holds out hope he will change his mind:

All this suggests that investors who are selling Treasuries in anticipation that the Fed will ease out of the market might be disappointed. If inflation meanders back and forth around the 1% level, Mr. Bernanke may guide the Committee towards achieving not only an unemployment rate but also a higher inflation target.

It's reasonable, of course, for Mr. Bernanke to try to prepare markets for the inevitable and necessary wind down of QE. But if he has to wave a white flag three months from now and say, "Sorry, we miscalculated," the trust of markets and dampened volatility that has driven markets over the past two or three years could probably never be fully regained.

The tide may begin to turn after the Fed doom and gloom, however, as treasuries advanced today, Bloomberg reported. For the first time in over a week, 10-year notes gained.

Treasuries appear to be consolidating after the recent selloff but sentiment remains fragile,” said Nicholas Stamenkovic, a fixed-income strategist at RIA Capital Markets Ltd. in Edinburgh. “Today’s five-year auction will provide a good gauge of investor demand.

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Edited by: Casey Quinlan


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