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Gundlach swipes at ‘second tier’ Gross over bond forecast

Gundlach swipes at ‘second tier’ Gross over bond forecast

Two of the biggest bond managers in the world have clashed over what will define a secular bear market for fixed income the US.

Jeff Gundlach rubbished claims by rival Bill Gross the US 10-year treasurybreaching the 2.60% yield mark is the most important forecast for 2017 by highlighting how it passed this measure place in December.

In a lengthy conference call, Citywire AA-rated Gundlach made a veiled reference to Janus Capital’s Bill Gross who made the 2.60% comment as his ‘one forecast’ for the year.

DoubleLine co-founder Gundlach said: ‘A couple of second-tier bond managers talking about 2.60% at a key technical level on US 10-year are ignoring the fact that 10-year made intraday high of 2.64%.

‘It hit that high on December 15 and closed at 2.5%. I think it will go below 2.25% in the current rally, while it won’t go below 2% in the current market,’ he added.

Gundlach said he is predicting the 10-year treasury to rise above 3% in the near-term, which would then signal the true end of the bond bull market.

‘Almost for sure we’re going to take a look at 3 percent on the 10-year during 2017, and if we take out 3 percent in 2017, it’s bye-bye bond bull market. Rest in peace.’

Looking longer-term, Gundlach said the idea of a 3% yield on 10-year treasuries would sound impossible but not that long ago but he believed it could rise to as much as 6% by 2020.

‘Four or five years from now I think the 10-year yield could be at 6% and people gasped when I said that before. Now we are talking in polite company about a 3% 10-year, so we are already some of the way towards a 6% yield and that has only been four months since I made that prediction.’

Commenting on Fed policy, Gundlach said he is positioning his portfolios for increased central bank activity. He said there is more than likely set to be a hike in June hike, while he said there will be “two to two-and-a-half” raises over the course of 2017.

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