(Bloomberg) — The stock and bond bulls are wrong, said one-time bond king Bill Gross, as both markets are “overvalued.”

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The former chief investment officer of Pacific Investment Management Co., speaking in an interview on Bloomberg TV, said the fair value of the 10-year Treasury yield is about 4.5%, compared to the current level of about 4.16%.

Gross, who retired from asset management in 2019, said inflation could be steady at around 3%. He noted that 10-year yields have historically traded about 135 basis points above the Fed’s policy rate.

So even if the Fed cuts interest rates to around 3%, the current 10-year yield would still be very low, given the historical correlation. In addition, rising government deficits will add supply pressure to the bond market, he said, repeating a view made in his recent investment outlook.

“All of the Treasury bulls,” Gross said, “I’d like to think their arguments are somewhat misplaced.”

For the stock market, Gross said the equity risk premium — measured as the difference between dividend yields and bond yields, is at historic lows, indicating that stocks are expensive.

Gross reiterated that he sold his holdings of regional banks after the recent rally. Right now, the asset with the “best value” is energy pipeline partnerships, which offer attractive returns and tax benefits, he said.

(Updates to include additional details throughout.)

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