Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy Government PANICs! Sterling Collapses! - 19th Mar 20
Coronavirus Market Crisis - Nowhere to Hide! - 19th Mar 20
Coronavirus Most Likely GDP Economic Outcome for Q1 and Q2 2020 - 19th Mar 20
How COVID-19 Leads to 2008-Style Bank Crisis - 19th Mar 20
Coronavirus Impact on Global Economic GDP Numbers - 19th Mar 20
Bticoin Crash Big Channel Review - 19th Mar 20
Gold is Doing Its Job…Silver Will Come Back as a Safe-Haven Asset - 19th Mar 20
The Chartology of Coronavirus Deflationary Event - 18th Mar 20
Fed Slashes Rates to Zero and Introduces QE in Response to COVID-19. Will Gold Rally Now? - 18th Mar 20
Coronavirus - Nothing to Fear but Fear Itself - 18th Mar 20
The Stocks Bear Market Is Upon Us... Or Not - 18th Mar 20
US and UK Coronavirus Containment Incompetence Resulting Catastrophic Trend Trajectories - 17th Mar 20

Market Oracle FREE Newsletter

Coronavirus-bear-market-2020-analysis

Bill Gross: Fed is "Certainly Set to Go"

Interest-Rates / US Interest Rates Dec 04, 2015 - 04:56 PM GMT

By: Bloomberg

Interest-Rates

Bill Gross of Janus Capital Management joined Bloomberg Radio and Television to react to today's jobs report.

Gross said the Federal Reserve is "certainly set to go…Fed is ready to go I think because of concerns on the real economy."

When asked if he lost money yesterday, Gross said: " Oh no, made money yesterday. I had lots of calls, sold lots of calls on five and 10-year German bunds, went the other way this time and so made a lot of money, making a lot of money today on those particular trades."


MICHAEL MCKEE: I guess this one is in train now.

BILL GROSS: Well, yes, they are certainly set to go. And it's something that I have been encouraging for a while, not because of the tightness of the labor market or the fact that wages are increasing. As a matter of fact, wages were up 0.2 percent and the YOY is 2.3 percent relative to 2.5. So there is no pressure from the standpoint of wages, but the Fed is ready to go I think because of concerns on the real economy.

And it's going to be an interesting experiment over the next three months or so, I'd say, they shift to a new policy in terms of determining the Fed funds rate, the -- using the excess reserves in terms of an interest rate as a top, and using reverse repos as a bottom. They're going to have to work with that.

TOM KEENE: And I think they're going to need at least three months to make sure it's smooth.

KEENE: Bill Gross, you wrote about Wiley Coyote yesterday. I don't think that translates in Paris, France too well. So what I would suggest, Bill, is please address for the international audience how Janet Yellen can avoid international mediocrities, including the challenges Mario Draghi has.

GROSS: Well the Fed has sort of backed off of their QE almost 12 months ago. Draghi continues. And Draghi's policy statement yesterday was quite interesting because he gave the market most of what they wanted. He's still in a whatever it takes mode.

He did give them quantitative easing for six more months. He included additional assets. It seemed like a very stimulative type of forward statement, but the market I think had a sense that since the amount wasn't increased that perhaps the ECB is the last bastion of quantitative easing and monetary, easing policy basically is at its limits.

KEENE: Right. Mike, I want to cut in here. This is an incredibly important question. Bill Gross, how many billions of dollars did you lose yesterday?

GROSS: Oh no, made money yesterday. I had lots of calls, sold lots of calls on five and 10-year German bunds, went the other way this time and so made a lot of money, making a lot of money today on those particular trades. So I think the U.S. is in a better position in terms of their yields relative to Germany and the EU, although to be fair, if $60 billion a month has been extended by six months and we've got with 18 months to go that's a trillion euros to go, and that puts their balance sheet close to EUR4 trillion euros relative to the Fed's balance sheet of EUR4 trillion with a much larger economy. So there is a lot of firepower left, and it pays to be careful when a central bank employs what I call a Martingale strategy, which is basically double up to catch up.

MCKEE: Well we thought until the Mario Draghi press conference yesterday, Bill, that we had a narrative going. They were stimulating. We were going to start raising rates and you would see the divergence trades in place. It could be predicted, but now it seems like what has brought back to the market is a lot of volatility, and we can't necessarily say we're going to see a big bond selloff here in the United States, and the opposite overseas, and the dollar gets stronger and the euro get weaker. We're not sure what's going to happen.

GROSS: And the United States has for the last 12 to 24 months have been talking about the new neutral interest rate. Right now the forward market in terms of Fed funds is basically forecasting the 80 to 85 basis points higher from a year from now, and then another 60 or so two years from now and then another 40 or so three years from now. So the pace, the expected pace is like 75, 50, 50. And that eventually takes us up to close to two percent, which is what I think is the neutral level given normal economic conditions.

KEENE: Bill, one more question and then we want to get to Alan Krueger of Princeton University helping out this half hour. Bill Gross, I'm sitting here in the city hall of Paris. And the basic idea is this is the land of perpetuity bonds. Is the thing that America is missing in our new fixed income world that we need longer duration bonds? Do they make sense for investors?

GROSS: Well not really at these levels do they? I mean and let's talk about pension funds, and I know you mean individual investors, but basically the same thing. Do they want to lock in future liabilities basically at a three percent level for a 30-year treasury or, amazingly, at a 2.69 percent level for a 30-year swap, to get a little esoteric?

KEENE: Yes.

GROSS: But anyway, does that pay the bills going forward? I don't think so. You know that for sure by looking at pension estimates they expect seven to 7.5 percent in terms of a 50/50 stock and bond mix. Do individual investors get that from a three percent long bond? I don't think so. I think it pays for the treasuries of these countries to issue long debt, as opposed to individuals and corporations to buy them.

MCKEE: Bill, we've got Alan Krueger of Princeton University here. Alan, we've got time for a quick question for Bill if you've got one.

ALAN KRUEGER: Well I guess I was a little bit confused on the long bonds. If you think there's not going to be much demand for them, wouldn't the interest rates be lot higher than three percent?

GROSS: Well there's not going to be a lot of issuance, first of all, as you know, next year from the treasury, going to be very mild period of time in terms of issuance. And there is still accumulation from Japan and from China, plus or minus. We're not quite sure what China does, but there is demand there. And there is demand, Alan, from corporations, surprisingly. I don't think there should be, but there is demand because they issue debt and then they basically hedge it out and turn it into short-term debt by basically receiving or buying long-term swaps.

That's a strange situation these days in terms of financial markets and in terms of the varying interest, but it seems to me that if Fed funds peak at two percent during this particular cycle that there's not much downside in price, and not much upside in yield for U.S. treasuries to buy. I would simply favor them versus German bunds or anything in Europe, still in a negative camp up to five years of course.

Bloomberg Radio and Television

bloomberg.com

Copyright © 2015 Bloomberg - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Bloomberg Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules