Bill Gross thinks conditions are ripe for a significant liquidity crisis in the markets, and he points a finger at his old firm for its potential to be at the center of the storm.
In his monthly note to investors, the Janus Capital Group fund manager said there are six specific triggers for such an event in which there would not be enough buyers to accommodate sellers in a panicked bond market. ( Tweet This )
“Long used to the inevitability of capital gains, investors and markets have not been tested during a stretch of time when prices go down and policymakers’ hands are tied to perform their historical function of buyer of last resort,” Gross wrote. “It’s then that liquidity will be tested.”
The comments come as fixed income investors face challenges on multiple fronts: Looming debt defaults from both Puerto Rico and Greece, and the latter’s potential exit from the euro zone, along with the likelihood of a Federal Reserve rate hike later this year.