Game over for bonds

PIMCO’s Bill Gross: QE3, Inflation, Muted Growth on the Way

By Daniel GrossAnother round (or two) of quantitative easing from the Federal Reserve, muted growth and an end to the 30-year bull run in government bonds.
That's what Bill Gross, one of the largest bond investors in the world, sees for the U.S. economy in the coming year...
Gross says long-term interest rates have been rising in recent weeks (here's a chart of the 10-year U.S. bond) for two principal reasons. "Yes, inflation is rearing its head. We're seeing that in oil prices and other commodities, and we're seeing it in the numbers," he said. The consumer price index has risen 2.9% in the past 12 months. In addition, Gross says, the Federal Reserve's "Operation Twist" is scheduled to end in a few months. Under this plan, the Fed sold short-term debt and purchased long-term bonds in an effort to keep longer-term interest rates lower. At its meeting earlier this week, the Fed indicated that it didn't plan to extend the operation. "Yields have risen based upon the possibility that the Fed simply stops buying long-term bonds," he said. "If they do that, the question becomes, who is left?"...
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Comment: Watch out, things may mover swifter than expected. Bond rally is over. The question is: will there be a smooth decline or a crash?