Europe News

Pimco’s Gross: Central Banks ‘Where Bad Bonds Go to Die’

Bill Gross, the co-Chief Investment Officer of Pimco, and manager of the world’s largest bond funds, has weighed in on recent central bank action with a scathing tweet.

Bill Gross, co-chief investment officer of Pacific Investment Management Co. (PIMCO)
Bloomberg | Getty Images

He said via Pimco’s Twitter account Monday night: “Central banks are where bad bonds go to die. Sell bad bonds, buy good ones. Investing sometimes can be very simple.”

Gross’s comments come as the Federal Reserve announced another program of quantitative easing (QE) and as the European Central Bank (ECB) prepares to increase the amount of riskier bonds on its balance sheet, via the recently announced Outright Monetary Transactions (OMTs) program.

His comments come just a week after Pimco revealed that it had pared back holdings of U.S. government bonds in Gross’s flagship bond fund to just 21 percent at the end of August from 33 percent at the end of July. The fund has returned 8.6 percent so far this year, beating average returns for the category of about 5.8 percent.

Gross famously said he was walking away from U.S. Treasurys more than a year ago – before having to admit defeat on the trade (Read More: Bill Gross on 'Mistake') ). He has recently waded into the debate over gold and equities, two asset classes outside the bond markets he is famed for playing. (Read More:Bill Gross on Gold; Bill Gross on Equities)

So can the “bond guru” still be trusted?

Robbert van Batenburg, head of global research, Louis Capital Markets, has an opposite view to Gross’s when it comes to Treasurys. He told CNBC Europe’s “Squawk Box” that the time to be long U.S. Treasurys again was fast approaching, as the U.S. election neared.

Yet others urged a longer-term approach to central bank action.

“Don’t fight the Fed or the ECB for the next four to six months,” Nick Beecroft, chairman and senior market analyst, Saxo Bank, told CNBC.

“It’s going to pump things up, but economic reality will catch up, so be fleet of foot.”

Written by Catherine Boyle, CNBC. Twitter: @catboyle01