Bill Gross Blames Retail ETF Investors for Bond Market Selloff

The Pimco co-founder says "vigilantes" are driving the 10-year Treasury toward 5%.

Jeff_Benjamin
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Wealth Management Editor
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Reviewed by: etf.com Staff
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Edited by: Mark Nacinovich

Legendary “Bond King” Bill Gross is calling out retail ETF investors as major contributors to the recent bond market selloff

In two separate interviews this week, the co-founder of and former chief investment officer at Pacific Investment Management Co., or Pimco, referenced “small investor vigilantes” who are shying away from the increased volatility in the fixed-income ETFs

“Over the last few days, large bond ETFs that number in the $100 billion range, are experiencing higher volume, which indicates small investor vigilantes are selling,” Gross said in a CNBC interview on Tuesday. “They’ve been spooked over the last week or so by declines of 3%, 4% and 5% in their bond ETFs.”  

With the yield on the closely watched 10-year Treasury climbing to around 4.7%, a level not seen since 2007, Gross’ deep institutional knowledge is being tapped to offer a sense for what the bond market is signaling. 

'Oversold' Bond Market

“The market is certainly oversold at the moment in anticipation of Treasury supplies and in anticipation of higher for longer in terms of the Fed’s own quantitative-tightening program,” he said, and added that he thinks the yield on the 10-year could get up to 5% as bond prices fall with the selloff. 

Over the last five trading days, investors withdrew $573 million from the $89.4 billion iShares Core U.S. Aggregate Bond ETF (AGG), which is down 2.5% from the start of the year. 

While Gross identified retail investors as a suddenly more significant factor in the bond market rout, he told Bloomberg on Wednesday that the bigger picture is that “the market is beginning to recognize Treasury supply based on a $2 trillion deficit, and it’s beginning to recognize the selling of bonds by the Fed, and it’s beginning to recognize what higher for longer means.” 

Gross described the stock market as “overvalued” and agreed that inflation expectations should be higher given the rising levels of energy prices. 

“The break-even rate for the 10-year, amazingly is a rather stable level of between 2% and 2.3% today,” he said. “That’s the expectation for inflation, but I would say it’s more like 3% because getting down to 2% inflation is going to be difficult.” 

By Gross’ analysis, investors need to be mindful of the so-called “term premium” of between 1% and 1.25% representing the risk of owning a 10-year Treasury over a short-term Treasury bill.  

“If fed-funds [rate] settle around 3% to 3.5%, a 5% 10-year Treasury is a decent value, but it’s not a great value,” he said.  

Contact Jeff Benjamin at [email protected] and find him on X: @BenjiWriter    

Jeff Benjamin is the wealth management editor at etf.com, responsible for coverage related to the financial planning industry. This includes writing, hosting podcasts, webinars, video interviews and presenting at in-person events.


Jeff is a veteran journalist with more than 30 years’ experience covering the financial markets. He has won more than two dozen national and regional awards for his reporting. He most recently worked as a senior columnist at InvestmentNews where he wrote about investment products and strategies, as well as the broader financial planning industry. Prior to that, Jeff worked as an analyst at Cerulli Associates where he researched and wrote reports on the alternative investments industry. Jeff also worked as a money management reporter at Dow Jones Newswires, where he covered the mutual fund industry.


Based in North Carolina, Jeff is a former Marine and has a bachelor’s degree in journalism from Central Michigan University.