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Pimco’s Gross vs. Goldman Sachs: Who’s Right?

Lawrence Lewitinn
Talking Numbers
Pimco’s Gross vs. Goldman Sachs: Who’s Right?

Goldman Sachs says there are more bond selloffs to come. Pimco's Bill Gross says otherwise. Who's right?

Think today’s bond sell-off is bad?

You ain’t seen nothing yet, at least according to what Goldman Sachs says in a bombshell research note making the rounds this morning.

The investment bank says the yield on the ten year treasury will hit 4-percent by 2016. That’s bad news for all bond investors, and PIMCO's Bill Gross in particular.

His flagship Total Return Fund posted its worst month in five years in May. And the continued steep sell-off in treasuries sure isn’t helping matters.

But the so-called “Bond King” remains undeterred, and in a tweet over the weekend said: “1 to 2 month performance numbers are a blip on a 40-year performance history. PIMCO marches on a long-term path.”

Of course, one man’s pain can always be another’s pleasure, and higher interest rates are attracting investors to the American greenback. The US Dollar Index traded at 84.59 at one point today, its highest in three years. Stocks have also weathered the sell-off as well. The Russell 2000 Index, a measure of small-cap companies, made a new record high today.

So, where are interest rates going next? And how high can rate go before stock investors begin to worry about higher borrowing costs? Richard Ross, Global Technical Strategist at Auerbach Grayson handles the charts while Enis Taner, Global Macro Editor at RiskReversal.com checks the fundamentals. Their answers might surprise you.

To hear Ross and Taner analyze what’s next for interest rates, watch the video above.