Courtesy of Pam Martens.
The Federal Reserve Building in Washington, D.C.
Jeffrey Gundlach, the bond guru who co-founded DoubleLine Capital in 2009 and was prescient on Treasury yields plunging in 2014, has been making some bold predictions for rates in 2015.
On December 9 of last year, Gundlach told Reuters’ Jennifer Ablan that the yield on the benchmark 10-year U.S. Treasury note could fall to 1 percent this year. Gundlach is quoted as follows in the article: “I still believe that there is a danger of repeat of a Treasury meltup that 2014 did end up bringing, particularly into the crescendo of October 15. If something can’t go up, it has to go down. Yields can’t seem to go up. They might go down. And if they go down any amount again, if the 10-year goes below 2 percent, even below 2.20 percent, that’s the line in the sand I am talking about.”
As of this morning, the 2.20 yield has been decisively breached. The 10-year Treasury is trading at a yield of 2.09 percent.
A month before the Reuters interview, Gundlach was opining to Forbes’ Matt Schifrin on why the Fed wants to raise interest rates and the impact that will have on the U.S. dollar. On the Fed’s motivation, Gundlach said: “They don’t really need the rates to be higher, but they seem to want to reload the gun so they aren’t stuck at zero without any tools.” Here at Wall Street On Parade, we were thinking along the same lines back on October 14.
As for the dollar, Gundlach told Schifrin that if the Fed tightens in 2015, the dollar will strengthen further, causing commodity prices to also fall: “[we will] import deflation and you will see an episode of deflationary scare,” Gundlach said.
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