Bill Gross Says Value Diminishing in Credit Markets

Nov. 13 (Bloomberg) -- Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said value is diminishing in credit markets and yield spreads may widen.

Mortgage and high-yield corporate debt is “overvalued,” making Treasuries and investment-grade company debt attractive, Gross, co-founder and chief investment officer of Newport Beach, California-based Pimco said in a Bloomberg Radio interview. Emerging-market debt also offers value to “some extent,” he said.

The sustainability of the U.S. economic recovery by the private sector after government stimulus programs remains in question, Gross said. Below-average growth may prompt yield spreads to increase on high-yield debt and the Federal Reserve’s plan to complete its mortgage purchase program will hurt returns on those securities, he said.

The $192.6 billion Total Return Fund managed by Gross returned 17 percent in the past year, beating 57 percent of its peers, according to data compiled by Bloomberg. The one-month return is 0.94 percent, outpacing 59 percent of its competitors. Pimco is a unit of Munich-based insurer Allianz SE