DoubleLine's Gundlach says long-dated bonds set for fresh selloff if Fed stays on hold
TLT•Gundlach sees higher long-term Treasury yields if the Fed holds rates
Influential bond investor Jeffrey Gundlach said on Tuesday that if the Federal Reserve holds interest rates steady at next week's policy meeting, defying market expectations, it could trigger a fresh rise in long-term Treasury yields and deepen the bond market's historic selloff.
Gundlach, DoubleLine Capital's chief executive officer, said in a webcast that market pricing implies about a 60% chance of a rate hike, but he is "leaning against" that outcome, citing doubts about the Fed's willingness to move despite firm inflation and resilient activity indicators.
"The fed funds rate looks like it should probably be about 50 basis points higher than it is right now, based on where the 2-year Treasury yield is," he said, noting the policy rate is again "out of sync" with the front end of the curve, though less dramatically than in 2022.
The fed funds rate on Tuesday was 3.63%, while the U.S. Treasury 2-year yield was at 4.998% US2YT=RR.
