'Bond King' Jeffrey Gundlach Is Fading Equities In Favor Of This Investment

Zinger Key Points
  • Gundlach has been grabbing hold of US debt amidst a Treasury market that is experiencing its worst downturn in decades.
  • Bank of America noted that the current decrease in Treasury prices is the greatest since 1949.

Billionaire "Bond King" Jeffrey Gundlach has been grabbing hold of U.S. debt.

"The U.S. Treasury Bond market is rallying tonight," the DoubleLine Capital founder tweeted Tuesday morning. "Been a long time. I have been a buyer recently."

On Tuesday, Sept. 27, saw a decline in U.S. bond yields along with an increase in price. After rising above 3.9% on Monday for the first time since 2010, the yield on the 10-year Treasury bond decreased by 10 basis points to 3.813%.

The yield on two-year Treasury bonds decreased 7 basis points to 4.24%.

Bank of America noted that the current decrease in Treasury prices is the greatest since 1949. The global bond market entered its first bear market in more than three decades in 2022 as the iShares US Aggregate Bond ETF fell 16% during the same period.

According to Gundlach, the Fed has boxed itself into a corner by rising rates too quickly. Bonds typically flatten while the Fed is raising rates, and occasionally it even inverts, with short-term rates surpassing long-term rates.
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"If they would have taken my advice back in April or May, where I said they should just hike 200 right now and see what happens," the Bond King said via Twitter.

Gundlach believes investors are becoming more cautious as a result of the Fed's pursuit of quantitative tightening, which ultimately creates opportunities in the bond market.

After closing 2021 at 1.51%, the 10-year yield has increased by 230 basis points this year. With the short-term yields surpassing the long-term yields, the Treasury market has been indicating an impending economic downturn.

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Posted In: Analyst ColorBondsEconomicsFederal ReserveMarketsTrading IdeasGeneralJeffrey Gundlach
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