Bill Gross says he feels like a jackass – basically

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Treasuries rose before a report that economists said will show U.S. residential real-estate prices dropped. Bill Gross, who runs the world’s largest bond fund, said it was a mistake to cut his Treasury holdings.

U.S. government debt has returned 2.58 percent in August, the most since December 2008, Bank of America Merrill Lynch data show. Pacific Investment Management Co.’s Gross said in a Financial Times interview that it had been a “mistake to bet so heavily against the price of U.S. government debt.” Treasuries slid yesterday after Federal Reserve Chairman Ben S. Bernanke said last week the economy isn’t weak enough to warrant immediate stimulus.

“Watching the data continues to confirm this dip is going to lead to at least a quarter of negative growth,” said Peter Chatwell, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. “Then I think the market will be happy to assume that some further stimulus from the Fed does indeed come its way, and that will be bond supportive, particularly the long end.”

Benchmark 10-year yield dropped four basis points to 2.22 percent at 10:29 a.m. in London, according to Bloomberg Bond Trader prices. The 2.125 percent note maturing in August 2021 rose 3/8, or $3.75 per $1,000 face amount, to 99 6/32.

The rate has fallen 57 basis points, or 0.57 percentage point, since July 29.