Gundlach’s Bond Call

His reasoning is fairly straightforward. The combination of rising U.S. interest rates and fiscal deficits is like a “suicide mission,” he said in the webcast, escalating the intensity from last month, when he referred to the trend as a “pretty dangerous cocktail.” Ultimately, the debt burden will rise to such a level that borrowing costs will surge, in his estimation. That hasn’t happened yet because ultra-low German yields are capping how much Treasuries can sell off.

Using my own expert math skills, I can tell you emphatically that, absent 5% GDP growth (and even if), the federal government cannot fund itself with borrowing costs of 6%. So should we get a dramatic fiscal scare or a recession, it’s unlikely to see rates continue rising during that, and it’s more likely that the Fed would go back to cutting.

I think even Jeff would tell you that.

Just my two cents, as someone who knows absolutely nothing about what the future may hold.

Gundlach Sees 6% Yield in 3 Years. Anyone Else? (Bloomberg)