The Treasury’s $35 billion sale of five-year notes was a “stinker” and underscores the trouble facing US economic policymakers, Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., told CNBC.

The auction, one of three this week that total $99 billion, attracted the lowest demand at a five-year securities sale in six months. It drew a yield of 2.149 percent. Gross said municipal bonds are outshining US debt.