With bonds in what he calls a mild bear market, influential investor Bill Gross has a different theory on where to find opportunity these days.
He calls it an "arbitrage type of idea," one that is looking to take advantage of certain deals in the works. Arbitrage is a tactic that takes advantage of price differences to make profits.
For one, Time Warner can offer investors a 5 to 15 percent return if the deal to be bought by AT&T "goes the right away," the Janus Henderson bond fund portfolio manager said Wednesday on CNBC's "Power Lunch."
The fate of that $85 billion deal is now in the hands of a judge after the Justice Department sued to block the merger. A decision is expected in several weeks.
He also thinks investors have the potential to get a 5 to 10 percent type of return on Monsanto, and Aetna "offers even more."
"I'd go convertible equity in terms of these situations to earn a high rate of return with a little bit more risk, obviously."
Meanwhile, he said there is "very little incentive" to invest in the bond market, particularly long-term Treasurys. That's because the 2-year and 5-year Treasury yields aren't much lower than the 10-year benchmark. And those longer-term notes are more volatile, he pointed out.
Plus, the bond market is down about 2.5 percent on average for the year, Gross said.
"I would characterize it as a hibernating bear market. One in which the bear is sort of growling but waking up, but not really the grizzly that we know at noontime," he said. "I would go in other directions."
When it comes to the Federal Reserve, Gross predicts another rate rise in June and then maybe one or two more hikes thereafter this year.
"I would expect for the balance of the year in 2018 for maybe an average 30 or 40 basis point hike and not much move in terms of the 10-year," he said.
The central bank kept its benchmark interest rate unchanged Wednesday.
— Reuters contributed to this report.