NEW YORK (CNN/Money) - A top U.S. bond fund manager said late Tuesday that he believes the rate of inflation is running well ahead of government estimates and Treasury holders may want to take some profits from the recent bond rally.

U.S. Treasury prices tumbled Wednesday, with the benchmark 10-year note dropping 20/32 and pushing the yield up to 4.07 percent, after Bill Gross released a written statement on the PIMCO Web site.

Gross wrote that the core consumer price index, which excludes food and energy prices, doesn't accurately reflect the actual needs of consumers because everyone needs to buy gasoline and food.

He said that inflation figures are also skewed when the government adjusts the prices for goods based on increases in the quality of those products.

"The government says that if the quality of a product got better over the last 12 months that it really didn't go up in price and in fact it may have actually gone down," he wrote, adding that 46 percent of the weight of the CPI comes from products subject to this type of adjustment.

Gross estimates that inflation may be 1 percent higher than official figures.

Treasury investors watch inflation rates closely because it erodes the value of fixed-income holdings.

Gross finished by saying "if those [people] are holders of government bonds based upon a benign outlook for inflation, they had better cash some of them in, especially at today's 4.0 percent yield for 10-year Treasurys."