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Pimco's Gross: Bond selloff a skirmish, not a war

Bill Gross
Andrew Harrer | Bloomberg | Getty Images
Bill Gross

Though Pimco's bond chief Bill Gross told clients in a note Thursday that the fund would triumph in the "bond wars" that could see investors earn lower returns, he later told CNBC that the bond market selloff is not all that serious.

"The bond market has sold off in terms of price, but listen, you know, this is a minor skirmish as opposed to a major war," Gross said on "Closing Bell."

(Read more: Weapons drawn, Gladiator Gross vows victory in 'bond wars')

After all, the average bond fund is down about 2 percent year-to-date, Gross said. If the Dow Jones industrial average saw a similar decline, investors probably would not leave equities the way they've fled bonds, but instead would consider it a "buying opportunity," he said.

"It's not like the Cuban missile crisis or a nuclear war. It's more like Grenada in terms of what we've gone through," Gross said. Referring to the U.S.-led invasion of the tiny Caribbean island nation in 1983, which resulted in a U.S. victory within a matter of weeks, suggests that he thinks the selloff will soon end.

Bond yields spiked higher in May and June on fears of rising interest rates tied to a potential pullback of the Federal Reserve's bond purchases. The Fed is buying $85 billion in Treasurys and agency mortgages monthly in an effort to spur hiring and lower long-term borrowing costs.

To Gross, though, the Fed will have to start tapering soon and when it does, stocks are likely to decline.

"Why do you think stocks have gone up by so much? It's because of quantitative easing 1, 2 and 3 and the ability to write checks going forward," Gross said. "When those checks aren't written, then even an optimist can't say stocks are on their own and looking good."

(Read more: Pimco's Bill Gross Looks at the Man in the Mirror)

Gross's comments come after investors pulled about $18.4 billion from his flagship Pimco Total Return Fund in May, June and July during a bond market selloff, according to Morningstar data. The fund is down 2.32 percent this year, according to the firm's website.

By CNBC's Drew Sandholm. Follow him on Twitter @DrewSandholm

—Reuters contributed to this report

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