Jeff Gundlach has a newfound love of 10-year U.S. Treasury notes.
Reuters reports the famed money manager “has reversed his once-bearish stance on government debt, saying he has bought more long-term Treasuries in the last month than in the last four years.”
Gundlach (left) told the news service he started buying Treasury notes in the last month after yields popped above 2%, because he sees value there relative to other asset classes, including stocks, which he said were “overbought.”
“I bought more long-term Treasuries in the last month than I’ve bought in four years. I am a fan of Treasuries now. I wasn’t a fan of Treasuries in July,” said Gundlach, chief investment officer and CEO of Los Angeles-based DoubleLine Capital, which manages $56 billion in assets.
Reuters notes that Gundlach’s views are a change from July, when he correctly predicted that government bonds could be at a peak in price. Ten-year notes were then yielding 1.48%, within “striking distance” of the 1.44% level touched in the previous month, the lowest going back to the early 1800s.
“They looked cheap at a yield above 2%, compared to certain riskier assets, which had gone up in price over the last six months while Treasury prices fell,” he said. “Also, owning 10-year Treasuries at yields above 2 percent provides an offset to credit risk we are taking elsewhere in the portfolio.”
Gundlach said he thought the recent rally in stocks was done.
“They are obviously overbought in the short term,” he said.
He also told the news service the U.S. economy would have no growth without central bank action.
“It’s pretty clear that the Bank of Japan, Bank of England, the ECB and the Federal Reserve have expanded their balance sheets by approximately 3.5% of GDP per year for the last four years,” he said, “and if it weren’t for that, you’d have negative GDP.”
Read Baha, a Gundlach Star, Recalls DoubleLine’s Stormy Beginnings by Joyce Hanson on AdvisorOne.