time to get out of treasuries ?

Bond genius bill gross is reducing his exposure to treasuries. In his post (Jan 2010), he explains that Treasury yields are too low, and that the Fed has been buying up too much of them. (Same deal for the Bank of England buying gilts). Gross is expecting a drop in treasury prices soon, especially since the Fed is plotting its exit strategy (i.e. selling its Treasury holdings). (See also Jubak's post on Gross' moves and comments)

More generally, there appears to have developed a supply and demand imbalance for government bonds. The supply has gone up due to various bailouts, but empty pockets are lowering demand. This should mean that gvt bond auctions won't attract that many buyers, meaning low prices and higher yields. To prevent that, central banks, like the Fed, have been buying up their own national bonds. It can't go on forever. When it stops gvt bonds prices will drop.

Gross suggests TIPS (real return bonds) might be an option because these mega deficits will result in inflation, but TIPS yields are really low too. According to bloomberg, the yield on a 5 year TIPS is 0.17%. Yuk.