Luis Alvarez
Bill Gross, co-founder of Pacific Investment Management, said that there is too much leverage in the global financial system with Japanese yen strength and “overdone treasury yield declines.”
In a X post, the American investor and retired fund manager said that those two things are “a key to the unwind.”
Hedge funds and commodity trading advisers continue to add to net short positions in the U.S. dollar/Japanese yen (USD:JPY), amounting to almost $1.3T, and it could expand to $2T in over the next two weeks, according to a Nomura Quant Insights report.
But due to the recent rise in volatility, hedge funds could downsize their short exposure to the yen (YCS). “For as long as investors continue backing out of carry trades and unwinding short Japanese yen (YCS) positions in the process, we expect Japanese equities (EWJ) and other global equity markets (ACWI) to see a sustained pattern of risk-off trades and weak momentum factor performance.”
Also, the U.S. 10-year Treasury yield (US10Y) is down 13.37% from a month ago, down 8.79% from five days ago, and down 2.10% year-to-date.
“I’m not buying the small recovery from morning bottoms,” said Gross. “Not selling either.”
He explained that the markets are too volatile with bid/ask spreads “extremely wide.”
