US Treasury Yields indicating recession might be near: Bill Gross
Historically, fall in government bond yields to a very low level are indicative of onset of recession. If current yields have to be believed the recession might be nearing, thinks Bill Gross of PIMCO. PIMCO manages funds worth $1.2 trillion.
On Thursday, the yield on the benchmark 10-year U.S. Treasury note dropped below 2 percent to 1.98 percent. Friday, the 10-year yield stood around 2.08 percent.
In May, Gross said the only way he would purchase Treasuries again is if the United States heads into another recession.
Gross, who manages the $245 billion Total Return Fund, reiterated that sentiment on Friday: "I don’t think there is any value there unless you see a recession."
On Thursday, Morgan Stanley warned in a research report the United States and euro zone are "dangerously close to recession," joining a number of firms that have slashed forecasts for global growth in the second half of the year. Not only are economists and investors bracing for a slowdown in the U.S., they are concerned about a deceleration in China’s growth rate to persistent sovereign-debt turmoil in Europe.
Morgan Stanley cut its global GDP forecast to 3.9 percent growth from 4.2 percent for 2011, and to 3.8 percent from 4.5 percent for 2012.