NEW YORK, Aug 29 (Reuters) - Jeffrey Gundlach, chief executive and chief investment officer of DoubleLine Capital, said Thursday that the yield on the 10-year U.S. Treasury note could hit 3.10 percent by the end of the year.
Speaking on cable television network CNBC, Gundlach also said he sees selling pressure on risk assets if the yield on the 10-year Treasury note rises even further.
“If the 10-year goes to 3.50, I think you’re going to see serious downward movements in risk assets, and that would stop the interest rate rise in its tracks,” Gundlach said.
Yields on bonds move inversely to prices of bonds.
The yield on the 10-year Treasury note was at 2.76 percent in intraday trading Thursday.
Gundlach said the market will be in “nervous condition” once the Federal Reserve reduces its $85 billion in monthly bond purchases, and recommended that investors seek yield in mortgage real estate investment trusts and closed-end bond funds.
He said Annaly Capital Management, a REIT, was an attractive investment. In June, Gundlach had predicted a further price drop in Annaly shares, saying he’d be a buyer at $12 if it fell that far. Annaly stock on Thursday was trading at around $11.50.
Gundlach, whose Los Angeles-based DoubleLine Capital oversees roughly $57 billion in assets, said his firm has a long position in the Russian stock market versus a short position against certain emerging market stocks.
Gundlach said the Russian stock market benefits from rising oil prices and is not dependent on monetary stimulus policies, but called emerging markets “too volatile.”
Gundlach’s flagship DoubleLine Total Return Bond Fund is down 1.02 percent so far this year, outperforming the Barclays U.S. Aggregate Total Return Index, which is down 3.02 percent, according to Lipper.
Gundlach, who said last year that he was shorting the stock of Apple Inc. at $610 and correctly predicted that the company’s stock price would fall to $425, said Thursday that the technology giant will have “problems” when it starts trading around $530 a share.
Apple shares were percent at $494.69 on Thursday afternoon.
He also said Chipotle is overvalued and that the company’s stock could fall by 30 percent, though he has yet to bet against Chipotle shares.
“When you have a breakdown in that stock, I think it’s going to drop by 30 percent,” Gundlach said.
Gundlach also said that the stock chart of nutritional supplements company Herbalife, which has drawn opposing bets from some high-profile hedge fund managers, is an “invitation for a short.”
Herbalife has been the subject of intense scrutiny for many months, with Pershing Square’s Bill Ackman betting against the company’s shares while hedge fund managers Carl Icahn and George Soros each have reported long positions in the stock.