Gross Says Fed Won’t Raise Rate Based on Strong Jobs Report

Gross: Things Not as Hunky Dory as 287,000 Jobs Suggests
  • Says U.S. economy isn’t as ‘hunky-dory’ as June number shows
  • He is shorting ‘artificially-priced’ high-yield bonds

June’s strong job report probably won’t change the Federal Reserve’s decision on when to raise interest rates, said Bill Gross of Janus Capital Group Inc.

“I think the Fed stays where it is,” said Gross in an interview Friday on Bloomberg Television.

The Fed left interest rates on hold last month as heightened uncertainties about the U.S. labor market and financial stability threatened their outlook, according to minutes of their meeting the week before the U.K. voted on June 23 to leave the European Union. While the economy added a better-than-expected 287,000 jobs in June, over the past three months the increase amounted to about 150,000 per month, said Gross.

“Things aren’t as hunky-dory as the 287,000 suggests,” he said. “There is nothing to get excited about.”

The S&P 500 Index and yields on short-term U.S. government bonds rose after the payrolls report on Friday. Job growth in June exceeded the highest estimate in a Bloomberg survey, after a revised 11,000 gain in May, a Labor Department report showed Friday. In April the economy added 144,000 jobs.

Futures markets indicate there is less than a 10 percent chance the central bank will raise short-term interest rates in July, September and November, and only a 22 percent chance that the Fed will boost rates in November, according to data compiled by Bloomberg.

Gross, who manages the Janus Global Unconstrained Bond Fund, said that in the current low-interest rate environment, high-yield bonds are “artificially priced” and at risk under certain circumstances.

“I wouldn’t buy them,” he said. “In fact, I am shorting them.”

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