A day after 10-year U.S. Treasury yields hit a 14-month low, bond guru and managing director of Pacific Investment Management Company LLC, Bill Gross, issued a gloomy monthly outlook on market conditions.“A lack of global aggregate demand … is the essence of the problem,” Gross said in his July outlook released Wednesday morning. “Slow growth in the developed world, insufficiently high levels of consumption in the emerging world, and seemingly inexplicable low total returns on investment portfolios – stocks and bonds – lie ahead.”
Bond yields closed Tuesday at 2.95 percent, dipping below 3 percent for the first time since April, 2009. The decline in yields reflects the rising tenor of fear in the global economy as uncertainty over sovereign debt abroad and excess consumer debt at home has sent investors racing for the relative safety of U.S. Treasuries.
“Global financial market returns stand at the threshold of mediocrity,” Gross said in his report. “Most major global bond indices now yield less than 3%, surely a forerunner of returns to come.”
Gross commented on what has become a growing global consensus that excessive debt was the major driving force behind the global economic slump. He casted doubt on whether the private sector can bolster the nascent recovery, noting that debt has approached “limits beyond which private enterprise’s productivity itself is threatened.”
Gross’ statement arrives as the U.S. House of Representatives begins debate on a final version of the proposed financial legislation to prevent a financial collapse the size of the one experienced in 2008. A final vote on the bill could come as early as tonight.