While others may be panicking, Jeffrey Gundlach of Doubleline Capital sees opportunities in the current bond rout, the worst the globe has seen in decades. According to a recent tweet, the chief investment officer at Doubleline says he’s buying Treasuries amid yields for U.S. 10-year bonds that have risen about 235 basis points so far this year, the highest increase dating back to 1962, reports an article in Financial Advisor Magazine.
Buying bonds in the current climate could be a risky move, the article contends, as the downturn continued in the global bond market as the UK moves forward with plans for major tax cuts and the Federal Reserve continues to hike rates up with no indication of lowering them as long as inflation remains high. That combination hasn’t been good for Treasuries, and investors have mostly shied away this year, especially after the bond rally in May and June disappeared with the Fed’s announcement that it would continue tightening. So while the current high yields are attractive, many analysts are highlighting the possibility of a new round of bond selloffs as a reason to stay away. U.S. 5-year notes are yielding 4.10%, a tempting level for investors. “While tactically there is scope to go long, strategically we see further upside on yields given our forecast for a 4.75-5% Fed Funds target and potential for European yields to head higher over coming months,” Prashant Newnaha of TD Securities told Financial Advisor.
In the 1980s, when Fed Chair Paul Volcker hiked rates to combat inflation, there were three instances when 10-year yields jumped by more than 225 basis points inside of a year, but on each of those occasions they ended up with only a modest increase.