Gundlach: Current Leg of Trump-Inspired Treasury Sell-Off 'About 80% Through'

Nov 11 2016 | 8:15pm ET

DoubleLine Capital’s Jeff Gundlach believes the current retracement in bond yields is about 80% over and doesn’t expect yields on the 10-year U.S. Treasury bond to rise above 2.35% this year, the bond-market maven said on CNBC Friday.

Gundlach’s comments were made as the 10-year yield jumped more than 35 basis points since Tuesday to cap its largest one-week rise since June 2013. 

Gundlach was one of the few large Wall Street money managers who early and unequivocally predicted Donald Trump would win the presidential election. The victory has sent the bond market reeling as investors violently reprice the risk of accelerating inflation rate during the upcoming Trump administration, which has promised tax cuts, a deficit spending spree that will fund massive investments in infrastructure and defense, and relaxation of banking regulations that have hindered the formation of credit.

Gundlach added that the U.S. Federal Reserve should "absolutely" hike raise interest rates when the FOMC meets in December, although he thinks bonds will catch a bid should the 10-year yield hit 2.35%. "“We should get a tradeable rally off of that level,” he noted.

Traders are putting the odds of a December move at 76% after wild gyrations in expectations Tuesday night as it became clear Trump had won the election. At one point, odds of a move in December fell to 25% before rebounding the following day. 

Gundlach, who is widely considered to rival former PIMCO head Bill Gross as a bond-market sage, started Los Angeles-based DoubleLine with Philip Barach in 2010 after managing TCW’s $12 billion Total Return Bond Fund. The firm now manages more than $100 billion across all vehicles and posted its 32nd consecutive month of net capital inflows in September. 

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