Gundlach reverses course on interest rates

The bond superstar sees no end in sight for rate increases, despite previously predicting rates would fall as low as 1.7% before year-end.
NOV 05, 2013
Bond superstar Jeffrey Gundlach believes interest rates on the 10-year Treasury note are heading to above 3% this year, he said Thursday during an interview on CNBC. As recently as the end of June, Mr. Gundlach, founder and chief executive of DoubleLine Capital LP, predicted the rate would fall as low as 1.7% by the end of the year. “Where we are right now is looking for signals on interest rates,” Mr. Gundlach said during the interview. “We don't see signals that the interest rate increase is over. Fear and loathing is the sentiment now,” he said. “The market's gone from saying, 'I don't care about volatility, I just want income,' to 'I don't care about income, I don't want volatility.'” One of the indicators Mr. Gundlach is watching to determine when this sentiment ends is discounts on closed-end bond funds. Closed-end bond funds have a fixed number of shares so, depending on the demand, or lack thereof, the shares will trade at a premium or discount to the net-asset value of the fund's underlying bonds. Before interest rates started to spike in May, the average closed-end bond fund was trading at a premium of more than 2%. In the aftermath of the 10-year Treasury's abrupt rise to today's rate of 2.7%, up from 1.6% in May, those same bond funds are now trading at an average discount of 7%, according to Closed-End Fund Advisors Inc. Because of the wide discounts, the funds have a cushion of safety against a further rise in interest rates, which move inversely to bond prices, and have yields of around 8%, Mr. Gundlach said. “No one wants to buy them because of the fear and loathing,” he said. “We're waiting to see when people start buying those.”

Latest News

Integrated Partners, Kestra welcome multigenerational advisor teams
Integrated Partners, Kestra welcome multigenerational advisor teams

Integrated Partners is adding a mother-son tandem to its network in Missouri as Kestra onboards a father-son advisor duo from UBS.

Trump not planning to fire Powell, market tension eases
Trump not planning to fire Powell, market tension eases

Futures indicate stocks will build on Tuesday's rally.

From stocks and economy to their own finances, consumers are getting gloomier
From stocks and economy to their own finances, consumers are getting gloomier

Cost of living still tops concerns about negative impacts on personal finances

Women share investing strengths, asset preferences in new study
Women share investing strengths, asset preferences in new study

Financial advisors remain vital allies even as DIY investing grows

Trump vows to 'be nice' to China, slash tariffs
Trump vows to 'be nice' to China, slash tariffs

A trade deal would mean significant cut in tariffs but 'it wont be zero'.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.