New York (HedgeCo.net) – The September FOMC meeting passed and the Fed left rates alone, but for how long? There are two more meetings in 2015, one on October 27 and 28 and one on December 15 and 16. Could the Fed raise rates at one of these two meetings?

The Fed so far has left interest rates where they have been for nearly seven years. However, if the Fed considers raising rates at either of these meetings, one hedge fund manager thinks they should start adding longer duration bonds.

According to an article from Reuters, Jeffrey Gundlach believes that raising rates too early would help longer-duration government bonds and that it would hurt high-yield bonds. The article also cited Gundlach as saying that it would be a policy mistake to raise rates this year.

In addition to the thoughts of Gundlach, there were dramatic changes in the Commitment of Traders report for 30-day treasuries last week. Large speculators moved from net short 65,485 contracts to net long 26,477 contracts. Commercial hedgers moved from net long 96,083 contracts to net long only 10,915 contracts. What is really interesting is that this information was released on Friday, but it reflects positions through last Tuesday which was two days ahead of the Fed meeting. What these shifts suggest is that large speculators became more certain of the Fed leaving rates alone as the meeting drew closer. Will investors feel that same way as we approach the October and December meetings?
Rick Pendergraft

Research Analyst
HedgeCoVest