Billionaire Gundlach Predicts Fed Money Printing at 6% Yields

Billionaire Jeffrey Gundlach, the founder of DoubleLine Capital, has forecasted that the Federal Reserve will likely resort to money printing to support the U.S. Treasury market. In a recent interview, Gundlach expressed his belief that the Fed will need to implement quantitative easing (QE) to counteract the lack of demand for long-term U.S. Treasuries. QE involves a central bank purchasing assets, typically government bonds, to increase the money supply and lower long-term interest rates.

Gundlach's forecast comes amid a trend where many investors have shifted their focus to short-term bonds. This shift has led to a decrease in demand for long-term Treasuries, causing yields to rise to uncomfortable levels. According to Gundlach, once yields reach around 6%, the Fed will likely initiate a money printing campaign similar to the one seen during the Covid-19 pandemic in 2020. He suggests that the Fed will announce QE to buy long-term Treasuries, which could lead to a significant rally in the long bond market.

Gundlach's analysis highlights the potential for a pivot in the Fed's monetary policy. He believes that the Fed will need to address the high yields and the substantial bond issuance that will occur during a recession. By announcing QE, the Fed could stabilize the long-term Treasury market and prevent yields from rising further. Gundlach advises investors to buy long-term Treasuries in anticipation of such an announcement, as it could result in a rapid increase in bond prices.

Gundlach's prediction underscores the importance of monitoring the Fed's actions and the state of the Treasury market. As yields continue to rise, investors and market participants will be closely watching for any signs of a policy shift from the Fed. Gundlach's insights provide a valuable perspective on the potential direction of monetary policy and the implications for the bond market.