Jeffrey Gundlach of DoubleLine Capital LP says the 10-year U.S. Treasury note will likely trade in a range between 2.20 and 2.80 percent during the second half of year. Gundlach also said U.S. Treasuries are a buy for investors as they are yielding in the upper half of his projected trading range. He said this on June 10th of 2014 and it seems he still expects the 10-year yield to be lower than the 2.40% bottom put in about 3 weeks and 20 basis points ago.
He runs primarily a bond fund, and he gets paid mainly on assets under management, so talking one’s book to encourage more inflows into the fund is very important for his business model. Therefore it is hard to know whether this is just ‘sales tactical speak’ or he legitimately believes that the 10-year hasn’t put in the bottom for not only this year but maybe for the next five to ten years and beyond as many on Wall Street believe.
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However, if he generally is drinking the Bond Kool-Aid, and who can blame him with all the craziness of central bank intervention, that means he didn’t take profits when many did at the 2.40% lows, as the same day yields were back at 2.47%, a 7 basis point move, and quickly moved another 25 basis points higher before settling back at the 2.60% level. If I were an investor in his fund I sure would have wanted him to take profits there ahead of another robust jobs report, a Fed meeting announcing continued tapering and maybe more tightening, and strong GDP numbers for the second quarter coming soon.
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But again Jeffrey Gundlach specializes in bonds so I am sure he knows best, but I would give him a friendly wager that the 10-year yield is higher than 2.80% over the next 6 months as our economy seems to be back-end predisposed to growth within a given year based upon everything from back-to-school retail spending, holiday supply chain drivers and football season.
