The latest round of bond bear market calls has become increasingly powerful since the benchmark 10-year note hit what many considered a generational low yield of 1.43 percent on July 11. Most recently, the yield has risen to 2.56 percent, a level not seen since March 2017.
Rising yields mean lower prices, which in turn cut into returns for bond investors looking for capital appreciation. Bond funds hold about $4.5 trillion in investor cash, with the bulk in mutual funds, according to the Investment Company Institute.
Gross said the days of mid-single digit returns for bond investors are likely over.
"I think bonds produce a return of zero to 1 percent," he said. "Is that a bear market? No. But it's a market where investors don't get much of a return."
Gross has been bearish on both stocks and bonds for at least the past six months, and his fund has suffered as a result. Earlier in the day, he told Bloomberg News that the unconstrained fund is short the bond market.
The $2.2 billion fund has returned just 2.2 percent over the past year, placing it in the bottom quarter of Morningstar rankings.
Gross cited three reasons for his bearish bond call: Rising nominal U.S. GDP that will stoke inflation, reduced purchases from global central banks, and higher budget deficits in the U.S.
"The flush of money is being met by a flush of supply, and that produces higher rates," he said, noting that central banks have injected $14 trillion of liquidity into the market over the past five years.
"If we posit that in September or October much of this doesn't go away but it stops increasing, then the pressure for slightly higher yields is probably with us," he said.
The European Central Bank has indicated that its quantitative easing program probably will end this year, and the U.S. Federal Reserve already has begun slowly shrinking the size of its nearly $4.5 trillion balance sheet.
Gross said he expects the Fed to move slowly on rate hikes, with just two likely for 2018.