Bill Grosss bet against U.S. Treasurys finally caught up with himat least in the short term.

In March, Mr. Gross publicly disclosed that he had bailed on Treasurys, arguing that the Feds bond buying was keeping yields artificially low. But economic data has taken a turn for the worse and pessimistic investors loaded up on Treasurys, pushing the 10-year yield below 3%.

The...