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Investors should consider buying short-term US Treasurys as an attractive investment opportunity, according to Pimco founder Bill Gross. The yields on one- and two-month bills have risen to levels not seen in over a decade, due to concerns that the US could default on its debt repayments. However, Gross believes that the political deadlock over the government's borrowing limit will eventually be resolved, as it has been in the past, and that short-term bills offer better returns than longer-term bonds.
The US debt ceiling has been raised 78 times since 1960 despite political standoffs, and the track record suggests that lawmakers will find a solution to the current deadlock, according to Bank of America's wealth management division. However, the government could run out of money as soon as June 1 if the borrowing limit is not lifted, triggering an economic crisis, as warned by Treasury Secretary Janet Yellen.
President Joe Biden has also warned that the US failing to repay its debts would be "a calamity," worse than "anything that's ever happened financially in the United States." Meanwhile, House Speaker Kevin McCarthy has backed a bill that would increase the government's borrowing limit by $1.5 trillion in exchange for tighter spending controls, but he faces considerable opposition to the plan from within his own party.
Yields on short-term US Treasury bills have spiked in recent weeks, causing investors to worry about a potential default. Gross suggests that those who are less concerned, like himself, should consider buying one- and two-month Treasury bills at higher rates than those offered by longer-term bills. Despite the current political standoff, Gross believes that the situation will be resolved, as it has been in the past.
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