Bill Gross is out with his latest Investment Outlook

Bill Gross' latest monthly note is out now. He's been talking about the break higher in Treasury yields lately and expands on his thesis in today's note.

"1.45% for tens can legitimately be cited as the end of the bond bull market which began at 15.8% in 1981," he writes.

Through 2017, bondholders could earn a decent (5%) return with some exposure to high yield. Looking ahead, he said that won't be possible.

"We have begun a bear market although not a dangerous one for bond investors. Annual returns should still likely be positive, although marginally so. Tax cuts and increasing budget deficits are providing a temporary fiscal push that likely will increase future inflation to the 2% core target long desired by the Fed. There are several significant reasons that should lead to a 2.70%+ year end yield and a mild bear market total return of 0-1% for most bond portfolios."

He said the economy is capable of 5% nominal growth for a few quarters at least in part due to the tax cut.

"This is not to say that there will be any more than 2 Fed hikes this year or that the ECB, the BOE and certainly the BOJ will raise short rates anytime soon. They won't. But the diminution of QE check writing and a 5% nominal GDP should be enough to produce higher 10 year Treasury yields," he writes.