##  [# Bill Gross Blames Retail ETF Investors for Bond Market Selloff ](/sections/news/bill-gross-blames-retail-etf-investors-bond-market-selloff) 

 

# Bill Gross Blames Retail ETF Investors for Bond Market Selloff 

 

 

The Pimco co-founder says "vigilantes" are driving the 10-year Treasury toward 5%.



 

 

 

 

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[By Jeff Benjamin](/authors/jeff-benjamin)

 Oct 05, 2023

 Edited by: Mark Nacinovich

 

 

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Legendary “Bond King” Bill Gross is calling out retail ETF investors as major contributors to the recent [bond market selloff](https://www.etf.com/sections/features/tlt-bond-etfs-hit-surging-rates).

In two separate interviews this week, the co-founder of and former chief investment officer at Pacific Investment Management Co., or [Pimco](https://www.etf.com/topics/pimco), referenced “small investor vigilantes” who are shying away from the [increased volatility](https://www.etf.com/sections/news/spiking-volatility-puts-financial-advisors-notice) in the [fixed-income ETFs](https://www.etf.com/topics/fixed-income).

“Over the last few days, large [bond ETFs](https://www.etf.com/topics/bond) that number in the $100 billion range, are experiencing higher volume, which indicates small investor vigilantes are selling,” Gross said in a[ CNBC interview ](https://www.cnbc.com/2023/10/03/bill-gross-says-the-10-year-treasury-yield-could-test-5percent-in-the-short-term.html)on Tuesday. “They’ve been spooked over the last week or so by declines of 3%, 4% and 5% in their bond ETFs.”

With the yield on the closely watched 10-year [Treasury](https://www.etf.com/topics/treasury) climbing to around 4.7%, a level not seen since 2007, Gross’ deep institutional knowledge is being tapped to offer a sense for what the bond market is signaling.

## **'Oversold' Bond Market**

“The market is certainly oversold at the moment in anticipation of Treasury supplies and in anticipation of higher for longer in terms of the [Fed’s](https://www.etf.com/topics/fed) own quantitative-tightening program,” he said, and added that he thinks the yield on the 10-year could get up to 5% as bond prices fall with the selloff.

Over the last five trading days, investors withdrew $573 million from the $89.4 billion [**iShares Core U.S. Aggregate Bond ETF (AGG)**,](https://www.etf.com/AGG) which is down 2.5% from the start of the year.

While Gross identified retail investors as a suddenly more significant factor in the bond market rout, he [told Bloomberg](https://www.bloomberg.com/news/videos/2023-10-04/bill-gross-on-bond-yields-housing-market-m-a-arbitrage-video) on Wednesday that the [bigger picture](https://www.etf.com/sections/features/financial-advisors-grapple-fed-policy) is that “the market is beginning to recognize Treasury supply based on a $2 trillion deficit, and it’s beginning to recognize the selling of bonds by the Fed, and it’s beginning to recognize what higher for longer means.”

Gross described the stock market as “overvalued” and agreed that inflation expectations should be higher given the rising levels of energy prices.

“The break-even rate for the 10-year, amazingly is a rather stable level of between 2% and 2.3% today,” he said. “That’s the expectation for inflation, but I would say it’s more like 3% because getting down to 2% inflation is going to be difficult.”

By Gross’ analysis, investors need to be mindful of the so-called “term premium” of between 1% and 1.25% representing the risk of owning a 10-year Treasury over a short-term Treasury bill.

“If fed-funds \[rate\] settle around 3% to 3.5%, a 5% 10-year Treasury is a decent value, but it’s not a great value,” he said.

*Contact Jeff Benjamin at* [*Jeff.Benjamin@etf.com*](mailto:Jeff.Benjamin@etf.com) *and find him on X: @BenjiWriter*

 
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  Jeff Benjamin is the wealth management editor at etf.com, responsible for coverage related to the financial planning industry. This includes writing,…   [View Bio](/authors/jeff-benjamin)

 



 

 


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