NEW YORK (Reuters) - Jeffrey Gundlach, chief executive officer of DoubleLine Capital, said on Tuesday that U.S. Treasuries were “not attractive” even though the 10-year yield US10YT=RR, a benchmark for global borrowing costs, crossed the critical 3 percent threshold earlier in the day.
Gundlach, who oversees more than $119 billion in assets and spoke at a New York event for DoubleLine clients, said the core Consumer Price Index and the New York Federal Reserve Underlying Inflation Gauge suggest U.S. inflation will go higher, which can hurt prices of government bonds.
Gundlach said the Fed’s “quantitative tightening” was a factor in rising Treasury yields. The uptrend in yields will continue as foreigners will be averse to purchasing U.S. bonds because of hedging costs, he said.
Gundlach said gold prices, which have broken their downtrend line, were on the verge of breaking out to the upside. “It’s getting almost exciting ... something big is happening,” he said.
“Gold is maintaining an upward pattern above its rising 200-day moving average, which is extremely good,” he added.
Based on classic chart reading, Gundlach said an “explosive, potential energy” of a huge “head-and-shoulders bottom” base was signaling a move of $1,000 in gold prices.
“I’m not predicting it ... I’m letting the market prove itself,” he said.
For its part, the Fed, under new chairman Jerome Powell, will be less sensitive to market movements, Gundlach said, adding he does not think Powell will intervene in financial markets.
“The Fed is not going to bail out the market - unless there is a big problem,” he said. “The stock market peaked the last day of Janet Yellen’s tenure, as Federal Reserve chairperson, literally,” Gundlach said.
“I’ve nicknamed her Lucky. Lucky Yellen. I mean, can you imagine? Leaving on the top day of the stock market? And the very next day, here comes Jay Powell. I don’t think that’s a coincidence. I think that’s when people realized that Powell has been vocal about not having this desire to have this 2017-type of stock market where we are going to come in and ‘help me out everytime it drops 2 percent’.”
Reporting by Jennifer Ablan; Editing by Tom Brown and Chris Reese