ECB Failure Ruins ‘Short of a Lifetime’

In April, Bill Gross said betting on a decline in the value of German government debt offered the trade of a “lifetime.” Thus far, the strategy has failed to deliver anything like the stellar profits anticipated by Gross. But that says less about the market acumen of the world’s best-known bond investor than it does about quantitative easing’s failure to extinguish the threat of deflation in the euro zone.

Here’s what Gross, formerly of Pimco and currently managing money at Janus Capital, tweeted on April 21:


The comparison he used to quantify the scale of the opportunity was the British pound’s 1992 departure (ignore that he got the year wrong) from the pre-euro currency-pegging system called the Exchange Rate Mechanism. That netted $1 billion for George Soros and Stanley Druckenmiller, as the pound lost 14 percent of its value against the deutsche mark in three weeks.

When Gross sent his tweet, the then benchmark German 10-year bond was trading at about 103.26. In the following weeks, it dropped to as low as 95.59, marking a 7.4 percent decline. But since then it’s drifted back up, and was recently at about 100.85, down a measly 2.3 percent from when Gross first recommended the transaction.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam