By Sam Forgione
NEW YORK, March 5 Jeffrey Gundlach, chief
executive officer and chief investment officer of DoubleLine
Capital, said on Tuesday that the U.S. Federal Reserve is likely
to continue its bond-buying program for years.
"I don't think that there's any confusion that the Fed is
going to keep this going, not for months, but for years,"
Gundlach said in an investor conference call in reference to the
Fed's monthly purchases of $85 billion in agency mortgages and
He was referring to financial markets which came under
selling pressure in late February when minutes from the Federal
Reserve's January meeting showed some policymakers divided over
how long quantitative easing should last.
"The Federal Reserve would not hesitate to increase their
bond-buying if interest rates started to rise," Gundlach added
later in the call.
Gundlach said the still-fragile U.S. economy would have no
growth without central bank action.
In an exclusive interview with Reuters on Monday, Gundlach
said: "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 percent of GDP per year for
the last four years - and if it weren't for that, you'd have
Gundlach told investors on the call that he predicted the
benchmark 10-year U.S. Treasury to yield 1.63 percent by the end
of this year. The yield on the safe-haven bond was at 1.89
percent at the close of trading on Tuesday.
Gundlach, whose firm oversees $56 billion in assets,
reiterated that he currently owns Treasuries in his flagship
DoubleLine Total Return Bond Fund.
Gundlach said that he also favors non-agency mortage-backed
securities- or mortgage debt that has no government guarantee of
principal repayment- and that such debt is likely to earn high
single-digit returns this year.
"I think the prices can move higher, I think they will move
higher also because of constrained or nonexistent, even
The DoubleLine Total Return Bond Fund has a 30 percent
exposure to non-agency mortgage debt.
Gundlach also said that he likes the yields on bank loans,
which are corporate loans that have "floating rates" that
protect against rising interest rates.
"For those of you who are really worried about rising
interest rates, bank loans are a good place to be because they
float," Gundlach said.
Gundlach, who has warned against investing in European debt
in the past, said that the euro currency will "absolutely,
positively" break up, likely within this "generation."
Gundlach, who shorted the stock of Apple Inc. at
$610 last year and correctly predicted that the stock price of
Apple Inc. would fall to $425, said that the stock is currently
at "fair value."
"I think it's probably really oversold, and it wouldn't
surprise me at all for it to go up, and yet I think it's about
at fair value."
The stock traded at $431.14 at the close of trading on
Tuesday, but not before dropping below $425 on Monday.