Bill Gross, the manager of the USD$1.4 billion Janus Capital Bond Fund, said in a radio interview with Bloomberg that there was a 100% chance the Fed will raise rates in December. “They are ready to go,” he said.
The interview came after the US non-farm payrolls report that said the US added 271,000 jobs in October and saw the largest year-on-year wage rises since 2009. Markets only expected 182,000 new jobs.
From a strategic perspective Gross’ fund had a negative duration heading into the employment report meaning that in effect the fund was short bonds or had sold bond derivatives in excess of the physical bond portfolio. The fund will profit if rates rise.
Gross has been vocal in urging the US Fed to raise interest rates although he does not expect the Fed to raise rates quickly. He was worried that hiking too quickly would put upward pressure on the US dollar and that this may hurt the global financial system. “I believe the Fed will be gradual,” he said.