Friday, January 8, 2016

Bill Gross: A Potentially Very Sad Time for Bonds; More Rate Hikes Probably Ahead

Bond money manager Bill Gross says bonds will have a tough period ahead if the Federal Reserve relies on job growth as a critical measure for raising interest rates.

Gross said it appears that the Fed is on track to raise rates three or four times this year, based on their recent statements.

A Labor Department report today showed that payroll growth surged in December to 292,000.

"If the Fed continues to believe jobs are a critical element as opposed to aggregate demand and global growth, bonds have a sad period ahead of them," Gross, said in a Bloomberg Radio interview.

"The Fed does believe that jobs and the unemployment rate is critical to future inflation over the medium term," Gross said. "So the three or four Fed steps that Stan Fischer and Janet Yellen seem to confirm are probably on track, at least in their verbiage."

This is completely in line with my view as I have outlined it in the EPJ Daily Alert. I fact, I added to a short bond position in yesterday's ALERT.

There will be more Fed rate hikes, though I am not putting a timeline on each of the Fed hikes at this time but there is a strong possibility the next one will be in March.

I believe we are at the start of a multi-year advance in interest rates.


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