We all know that the 10 year treasury note is very important in how insurance carriers price their indexed annuities. The higher the 10 year, the higher rates, caps and riders are. The question is when will this benchmark rate be truly on the rise.
Bond guru Bill Gross was on Bloomberg this week and this is what he had to say:
- The jobs report today tells us the economy is doing “all right,” but it faces a lot of structural headwinds.
- The positives in the U.S. economy are energy production and housing; the fiscal drag from the cliff deal will offset some of these positives.
- He is afraid of the 30-year Treasury because of the possibility of inflation out in the future; the five-year Treasury on the other hand is reasonable.
- He thinks it is possible that we hit 240bps on the 10-year Treasury only if the Fed abandons quantitative easing.
- In Europe he would be overweight Italian bonds and underweight German.
You can watch the full interview at this link: http://bloom.bg/VD0lVm