Gundlach: No Fed Hike, But Expect 'Hawkish Language'

Sep 19 2016 | 7:14pm ET

By Jennifer Ablan (Reuters) - The Federal Reserve will not raise interest rates when it meets this week, but the U.S. central bank will include “hawkish no-hike language,” Jeffrey Gundlach, chief executive of DoubleLine Capital, said on Monday.

In a telephone interview with Reuters, Gundlach said Fed officials “want to be able to raise rates later this year if the WIRP (World Interest Rate Probability) index is in the 40s,” Gundlach said. Currently WIRP, which measures the implied probability of an interest rate hike between 0 and 100, sits around 18 percent for the Fed's meeting on Sept. 21.

Gundlach, who oversees more than $100 billion at Los Angeles-based DoubleLine, said earlier this month on an investor webcast that Fed officials want to show that they are not guided by the markets. "The Fed wants to show, at some point, that they can’t be replaced by WIRP. The only way they can do that is to tighten when WIRP is below 50," Gundlach said on the webcast.

Gundlach told investors that the Fed will not hike in September if the WIRP is below 40 and the S&P 500 is below 2150.

On Monday, Gundlach also said Treasury bonds are "sniffing out a new bond-market unfriendly environment, which likely includes a fiscal-policy pivot."

In that regard, the yield on the 10-year Treasury note is in a new range: "1.70 percent is the new 1.55 percent."


In Depth

PAAMCO: Will Inflation Deflate the Asset Bubble?

Jan 30 2018 | 9:49pm ET

As the U.S. shifts from monetary stimulus to fiscal stimulus, market pricing should...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Boost Hedge Fund Marketing ROI By Raising Your ROO

Feb 14 2018 | 9:57pm ET

Tasked with delivering returns on client capital, a common dilemma for many alternative...