"The fact that they have been tightening policy means that they have more room to provide future stimulus if they see the situation is deteriorating, " he says.

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No amount of monetary stimulus is going to help this situation, it simply has to run its course.

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"While the economic picture in the U.S. is getting better, the market is reliant on the knowledge that stimulus is still available if the situation were to worsen, " Mr. Taylor added.

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"So it's pretty urgent that the economic stimulus bill not only address the job situation, but address health insurance coverage too, " she says.

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But this is intertwined with the situation in Europe, the possibility for further stimulus in the U.S., higher inflation in China.

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While the positions may get hurt if there is no new stimulus from the Fed, or if the euro-zone situation improves, Mr. Gross has been doing well so far this year amid the uncertainties over the 17-nation euro zone and the U.S. growth outlook.

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The prospect is for that situation to worsen as state and local budget assistance from the federal stimulus efforts wind down, while the woes in the real estate sector have returned now that the homebuyer rebates have expired.

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Although at that point the idea Treasuries were in a bubble saw little speculation, the perceived pessimism here probably began to surface thanks to an improving economic situation and increasing likelihood the Fed would eventually curb its enthusiasm for stimulus measures.

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