ECB and BOJ could cause 'hell' to break loose in the global bond market: Bill Gross

US Federal Reserve

Expecting a more robust economic growth, the US Federal Reserve raised its benchmark interest rate by 25 basis point (bps) for the second time in three months.

While the US Fed plans more rate hikes later this year, it is the policy outcome of two other central banks  that are more important and should be looked out for, says Bill Gross, billionaire bond investor and fund manager at Janus Capital.

Gross said that the outcome of these two events could cause mayhem in the bond market.

Speaking to CNBC, Gross said that the monetary policy stance in Europe and Japan is what making investors buy US Treasuries .

He said that around USD 80 billion a month in bonds is coming from the European Central Bank (ECB) and from Japan where the 10 year treasury is pinned at zero to 10 bps.

"Once [ECB President Mario] Draghi begins to taper, that probably won't happen for a few months, but once he begins to taper and reduce that USD 80 billion a month, once that zero to 10 basis point cap is eliminated in Japan, then hell could break loose in terms of the bond market on a global basis," Gross said.

Post the rate hike both stocks and bonds were up in America. Gross said that the Fed commentary after the meet was less hawkish than some had feared and is responsible for the rally in US stocks and bonds.

He feels that the market is still a bit 'sour' in terms of the economy which is why Janet Yellen's outlook was less hawkish.

Watch the entire interview here.