Seeking Alpha

Gross scratches his head over rate hike expectations

  • "Just to let you know: market pricing in 4% Fed Funds by late 2018," tweeted Bill Gross earlier today.
  • Gross' point with this observation is likely to illustrate what he sees as an absurd level of hedging against higher rates given the Fed's promise of ZIRP into 2016. Not to start an argument with the bond king, but - assuming 0% into 2016 - what's so absurd about 200 bps of rate hikes per year in the two years following?
  • Then there's that ZIRP promise - it's one made by Ben Bernanke and his 2nd-in-command Janet Yellen. Bernanke is exiting soon and - if Larry Summers gets the nod for Fed chief - Yellen is likely gone as well. The center point of Fed thinking on this matter may be about to shift decidedly more hawkish.
  • Long duration Treasury ETFs: TLH, TLT, IEF, DTYL, DLBL, ILTB, TENZ, ITE, TLO, EDV, VGIT, VGLT, TMF, TYD, LBND, UBT, UST, TMV, TYO, DSTJ, DSXJ, SBND, PST, TBT, DTYS, DLBS, TBF, TTT, TYNS, TYBS, TBX.
  • Short-duration Treasury ETFs: SHY, SHV, IEI, BIL, TUZ, FIVZ, DTUL, VGSH, DTUS, DFVS, DFVL, SST, ISTB, TBZ.
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