European debt now a better bet than US Treasuries

WASHINGTON — Janet Yellen can’t be happy as bond guru Bill Gross shines a bright spotlight on a fast-emerging risk to US Treasury securities: the November election.

In recent interviews, the former chief investment officer of Pacific Investment Management Co (PIMCO) has talked up European debt as a ready alternative to securities sold by US Treasury Secretary Yellen’s team.

“As we move to November, and something becomes more clear as to who might or who might not win, the uncertainty plus the potential policy implications could impact Treasuries significantly,” Gross told Bloomberg.

Gross’s apparent pivot to Europe comes even after electoral shocks in Paris and Berlin. In European Parliament elections on June 9, France’s Emmanuel Macron and Germany’s Olaf Scholz suffered setbacks versus far-right parties.

French bond yields jumped to their highest level since November as President Macron called a snap election in a bid to consolidate power. German and Italian bond prices plunged, too, as traders assessed the fiscal policy implications of the elections.

Political surprises emanating from the Continent, Gross notes, fit with other big upsets in India, Mexico and South Africa that caught many bond investors on the wrong side of market reactions. Could a US election pitting President Joe Biden’s Democrats against Donald Trump’s Republicans be the next market spoiler?

“What we’ve seen the last few weeks is a reaction to uncertainty, in terms of not only the party that’s dominating, but uncertainty as to what their policies will be,” Gross explains.

As such, Gross adds, “there’s coming a point where European bonds are more attractive than Treasury bonds, in my opinion. In terms of attraction, the German 10-year bonds and