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"I
like bonds now more than a month ago," Gundlach said in a
telephone interview.
U.S. two-year note yields hit 0.82 percent on Wednesday, the
highest since April 2011. Benchmark 10-year Treasury note yields
rose to 2.3 percent on Wednesday, the highest in nearly seven
weeks.
Gundlach, whose Los Angeles-based DoubleLine Capital had $76
billion in assets under management as of June 30, also said the
junk bond market should be watched closely after the Federal
Reserve's interest rate decision on Thursday.
"The market should rally with the Fed not tightening," he said.
Gundlach said junk bond prices have been signaling financial
stress.
Last year, Gundlach correctly predicted that Treasury yields
would fall, not rise as many others had forecast, because
inflationary pressures were non-existent and technical factors,
including aging demographics, were at play.
Gundlach, who has maintained since May the Fed will not raise
rates at all this year, said of tomorrow's meeting: "I think
they will have to respect the 32 percent probabilities" the
markets are placing on an interest rate increase tomorrow.
"The real question for everyone is: Can the U.S. and global
economy function in a reasonable way with so-called normal
interest rates? You aren’t going to get the answer with zero
rates or 25 basis points tomorrow."
(Reporting By Jennifer Ablan; Editing by Tom Brown)
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