Bloomberg Jeff Gundlach of DoubleLine Capital predicts Treasury yields will rise further.
For investors looking for an inflection point in the bond market, this is it.
Jeff Gundlach, chief executive of Doubleline Capital, on Thursday projected that U.S. Treasury yields are likely to rise further and investors should adjust accordingly.
The so-called bond king told CNN that the 10-year yield TMUBMUSD10Y, +0.01% could rise to 3.5% and the 30-year TMUBMUSD30Y, +0.34% could climb to 4%, which are likely to hurt companies sensitive to higher rates, such as auto makers.
In a tweet last month, Gundlach had forecast that the 30-year Treasury yield closing above 3.25% two days in a row will signify a “game changer.”
Yields: On the march! 10’s above 3% again, this time without financial media concern. Watch 3.25% on 30’s. Two closes above = game changer.
— Jeffrey Gundlach (@TruthGundlach) September 19, 2018
His prophecy has been fulfilled. The 30-year Treasury yield ended at 3.357% on Thursday after rising to 3.316% on Wednesday, according to FactSet.
“The last man standing was the 30-year, and it has definitively broken above a multiyear base that should, over time, carry us to significantly higher yields,” Gundlach told Reuters. “Also, the curve is steepening a little in this breakout, which is another sign that the situation has changed.”
JEFFREY GUNDLACH, CEO OF DOUBLELINE CAPITAL, SAYS 30-YEAR U.S. TREASURY BOND YIELD HAS BROKEN ABOVE MULTI-YEAR BASE, SHOULD LEAD TO SIGNIFICANTLY HIGHER YIELDS FOR INVESTORS
— Jennifer Ablan (@jennablan) October 4, 2018
Yields rose sharply this week on the back of strong economic data that supported the widespread belief that the Federal Reserve will maintain its hawkish bias to forestall a possible overheating of the economy.
The Fed last week raised the benchmark interest rate for a third time this year and hinted at another tightening by the end of 2018 and three more hikes in 2019.
While higher rates were generally anticipated by the financial markets, the pace of the rise has taken some investors off guard, triggering a selloff in the stock market SPX, -0.82% .
Still, strategists took the market’s gyrations in stride, noting that the spike in rates is a result of a healthy economy rather than any negative development.
Read: JPMorgan strategist urges investors to stay bullish even as stocks log worst day in months
“We view this move as a reaction to an economy that is in very good shape; an economy that should be supportive of equities,” said John Bredemus, head of capital markets for Allianz Investment Management.
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