With the U.S. and many other governments giving bondholders and savers “haircuts” by keeping real interest rates so low, PIMCO’s Bill Gross says it may be time to for investors to “exorcise” U.S. Treasuries from their portfolios.

“To rebalance debt loads and re-equitize financial institutions that should have known better, central banks and policymakers are taking money from one class of asset holders and giving it to another,” Gross writes in his latest investment commentary on PIMCO’s web site. “A low or negative real interest rate for an ‘extended period of time’ is the most devilish of all policy tools. And the asset class holder that it affects, or better yet, ‘infects,’ is the small saver and institutions such as insurance companies and pension funds that hold long-term fixed income assets.”

Gross says investors need to realize that yield or “spread” comes in different forms. “Maturity extension is just one of them, yet if yields are too low based on historical example, an investor should analyze other yields or other ‘spreads’ which are not,” he writes.

“That is what we call ‘safe spread’ — the recognition that credit spreads, or emerging market returns, or currencies with positive and high real interest rates are more attractive than those old-fashioned gilts and Treasury bonds offering 2–3%,” Gross says, adding that those “old-fashioned” markets should be “’exorcised’ from model portfolios and replaced with more attractive alternatives both from a risk and a reward standpoint. It is still possible to produce 4–5% returns from a conservatively positioned bond portfolio — you just have to do it with a different mix of global assets.”