Load up on Treasury bills for their juicy yields because the debt-limit standoff will likely be resolved, billionaire bond king Bill Gross says


Pimco co-founder Bill Gross.Jim Young/Reuters

  • Investors should snap up short-term US Treasurys, according to Pimco founder Bill Gross.

  • Yields on 1- and 2-month bills have spiked on fears that the US could default on its debt repayments.

  • “I think it’s ridiculous – it’s always resolved,” the billionaire “bond king” told Bloomberg TV.

Short-term US debt yields have surged to highs unseen in over a decade amid a political standoff over the government’s borrowing limit. That presents an attractive investing opportunity, according to billionaire “bond king” Bill Gross.

Investors should load up on one- and two-month bills to lock in the juicy yields – because the debt-ceiling deadlock will most likely be resolved, as has been the case every time in the past, according to the Pimco co-founder.

One-month Treasury bill yields have jumped 204 basis points to 5.35% since April 21 – and Gross said he’s betting on the assets because they offer better returns than longer-term bonds.

The US debt ceiling has been altered 78 times since 1960 despite political standoffs, and that track record suggests lawmakers will eventually knock together a solution despite a current deadlock, Bank of America’s wealth management division said in a recent note. The government could run out of money as soon as June 1 if its borrowing limit isn’t lifted by then, triggering an economic crisis, Treasury Secretary Janet Yellen has warned.

“I think it’s ridiculous – it’s always resolved, not that it’s a 100% chance, but I think it gets resolved,” Gross told Bloomberg TV.

The debt ceiling is a limit on how much the government can borrow, set by Congress. The US hit the $31.4 trillion mark on January 19 and can raise more money only if that limit is lifted – but the White House and the Republican-led House of Representatives can’t agree on how to resolve the potential crisis.

President Joe Biden said in January that the US failing to repay its debts would be “a calamity,” worse than “anything that’s ever happened financially in the United States”.

Meanwhile, House Speaker Kevin McCarthy has backed a bill that would up the government’s borrowing limit by $1.5 trillion in exchange for tighter spending controls, but he only holds a razor-thin majority and faces considerable opposition to the plan from within his own party.

Yields on short-term US Treasury bills have spiked in the past few weeks, with investors fretting that the ongoing deadlock in Washington will lead to a default.

“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, and they’ve done that this time,” he told Bloomberg TV.

“I would suggest for those that are less concerned, similar to myself, that they buy 1-month, 2-month Treasury bills at a much higher rate than they get with a longer-term Treasury bill,” Gross added.

Read more: ‘Bond King’ Bill Gross snaps up battered Western Alliance and PacWest shares despite regional bank turmoil

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