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00:00WE ARE NOW JOINED BY MANISH SINGH, THE HEAD OF CROSS BRIDGE CAPITAL INVESTMENTS. WE SAW TREASURY YIELDS PICK UP OVERNIGHT, LARGELY BASED ON WHAT IS HAPPENING WITH OIL. IS TWO TO THREE HIKES NEXT YEAR A LITTLE BIT TOO MANY, DO YOU TH INK? REPORTER: I THINK IT IS A LITTLE BIT TOO MANY. I THINK IT MIGHT BE TOO MUCH OF A BULLISH CALL. LET'S LOOK AT THE OTHER ASPECT. LET'S LOOK AT HOW THE MARKET HAS BEEN TRADING THIS YEAR. THIS IS WHAT HAS BEEN HAPPENING. AND IN THE LARGER PICTURE, I IN N TERMS OF WHERE THE GROWTH IS GOING, IT HAS NOT CHANGED MUCH. PEOPLE ARE TALKING ABOUT INTERNATIONAL TRADE, AND HOW DOES THAT IMPACT ECONOMIC GROWTH? I WOULD NOT FORECAST SO FAR OUT AND SAY WE WILL SEE THREE HIKES NEXT YEAR. I THINK WE MIGHT GET ONE IN DECEMBER, WHICH IS NOT A BAD THING, BUT I DO NOT SEE THE FED RUSHING. AND AS WE PROVE ECONOMIC GROWTH IS NOT STRONG, WE WILL SEE THAT FED BACK OFF. ALL THE ECONOMIC GROWTH HAS BEEN HARD-FOUGHT, WHICH IS AROUND 1.8% TO 2%. I WOULD BE VERY SURPRISED IF WE SAW THREE HIKES NEXT YEAR. CAROLINE: WHAT TO DO WITH U.S. TREASURIES THEREFORE? THEY ARE THERE WAS PERFORMING MAJOR BOND PERFORMING THIS YEAR, DOWN ALMOST 6%. YOU THINK YOU SHOULD HOLD ON TO U.S. 10 YEARS AT THIS LEVEL? >> I WOULD STILL HOLD ONTO THEM AT THIS LEVEL BECAUSE I REALLY DO NOT SEE THINGS ACCELERATING, UNLESS THERE IS A POLICY CHANGE. BUT I STILL THINK IF YOU LOOK AT THE DOWNSIDE, I DON'T THINK WE ARE GOING TO GO ANYWHERE AROUND 3%, WHICH SOME PEOPLE HAVE BEEN CALLING IN THE WORST-CASE SCENARIO. I THINK IT IS LIKELY THE TREASURY WILL GO DOWN TO 1.5%, HIGHER THAN THE 2.5%. I WOULD STILL HOLD ON TO THAT. I STILL THINK THE ECONOMIC STAGNATION, WHICH HAS BEEN TALKED ABOUT IN ECONOMIC CIRCLES, HAS A BEARING ON WHAT IS HAPPENING IN THE U.S., AND UNLESS WE SEE A POLICY CHANGE REGARDING GOVERNMENT SPENDING AND FISCAL SPENDING, THERE IS NO USE WORRYING ABOUT WHETHER THE U.S. TREASURIES WILL SELL OUT. GUY: TO DELIVER TWO TO THREE HIKES, GIVEN WHERE WE ARE IN THIS CYCLE STRIKES ME AS SOMETHING THAT DOES NOT FIT WITH HISTORY. DO YOU THINK WE WILL KEEP GOING FOR LONGER? IS THIS GOING TO BE A GRIND AND THEREFORE, WE CAN EXTRAPOLATE FURTHER HIKES? OR, DO YOU THINK THIS WILL COME TO AN END TOO, AND THEREFORE, THEY HAVE TO PUT AMMUNITION IN PLACE? >> I THINK THIS COULD GO ON. INFLATION WILL NOT COME BY ITSELF, UNLESS YOU WORK OUT ALL THE SLACK IN THE ECONOMY. OR, THERE IS INCREASED GOVERNMENT SPENDING OR AN INCREASE IN SALARIES. BUT HONESTLY, WE DO NOT KNOW AND I THINK VERY FEW PEOPLE KNOW THAT AND I DON'T EVEN THINK THAT FED KNOWS THAT. WHAT YOU GET IS A VERY OPTIMISTIC PICTURE, ANYTIME YOU GET A FORECAST OF GDP INFLATION AND DOT PLOTS. I THINK THIS IS GOING TO CONTINUE AND HONESTLY, I DON'T THINK THE SLACK IS GOING TO END. WE HAVE TO GO QUARTER BY QUARTER. WHAT WE CAN BE SURE ABOUT IS THE FED IS NOT GOING TO RUSH. THEREFORE, IF YOU ARE HOLDING BONDS OR THE U.S. TREASURY, YOU DON'T HAVE TO WORRY ABOUT IT. I WOULD SAY THAT I AM CONSTRUCTIVE ON WHAT IS HAPPENING, BUT I AM NOT

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The Likelihood of Three Fed Rate Hikes by End of 2017

Manish Singh, head of investments at Crossbridge Capital, discusses possible monetary policy from the Federal Reserve and how it may impact U.S. economic growth. He speaks with Guy Johnson and Caroline Hyde on “Bloomberg Markets: European Open.” (Source: Bloomberg)

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