Allianz SE’s Mohamed El-Erian said bond traders underestimate the likelihood that the Federal Reserve will raise interest rates next month after a surge in U.S. hiring bolstered the case for tighter monetary policy.

Treasuries tumbled Friday after Labor Department data showed U.S. job gains exceeded forecasts in July. Still, fed funds futures are pricing in only about a 26 percent probability that officials led by Fed Chair Janet Yellen will raise rates in September, following liftoff from near zero last year.

"I think that’s too low -- I’d put it at 40, 45 percent," El-Erian, Allianz’s chief economic adviser, said in a Bloomberg Television interview. "The front end is controlled by the Fed and today’s number tells you there’s a higher probability that the Fed may hike rates this year."

Traders have rebuilt wagers on a 2016 rate increase over the past month after slashing those bets following the U.K.’s June 23 vote to leave the European Union. Chicago Fed President Charles Evans said Aug. 3 that a rate hike could be warranted this year as the economy picks up steam.

Yields on U.S. two-year notes, the coupon securities most sensitive to Fed policy expectations, rose eight basis points, or 0.08 percentage point, to 0.72 percent as of 2:31 p.m. New York time, according to Bloomberg Bond Trader data. Benchmark 10-year note yields rose eight basis points to 1.58 percent.

Meanwhile, Bill Gross, El-Erian’s former colleague at Pacific Investment Management Co., sees a September hike as less likely. While recent data show improvement in U.S. jobs, retail sales and industrial production, economic momentum is sluggish elsewhere in the world. The Bank of England on Thursday cut interest rates and announced other stimulus to ramp up defenses against a Brexit-induced slump, reinforcing the trend of monetary easing worldwide.

"Is it enough for Janet Yellen in September? I don’t think so," said Gross, who built the world’s biggest bond fund at Pimco and is now at Denver-based Janus Capital Group Inc. "I think she’s still focused on global conditions. Perhaps in December if this continues, but not now."

Labor Department data showed employers added 255,000 positions in July, versus a median forecast of 180,000 in a Bloomberg survey of economists. Wage growth showed signs of acceleration, with average hourly earnings rising a more-than-forecast 0.3 percent from a month earlier.

Yellen will have an opportunity to air her views on the economy’s progress when she speaks on Aug. 26 at the Kansas City Fed’s annual policy symposium in Jackson Hole, Wyoming. Central bank officials are still looking to raise rates around two times in 2016, according to the latest projections.