Jeffrey Gundlach Says Fed Is Making A Big Mistake

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Jeffrey Gundlach, chief of Doubleline Capital LP, said Tuesday during a webcast that the Federal Reserve wasn’t expected to walk away from the $85 billion a month bond buying program. Jeffrey Gundlach manages the $37 billion DoubleLine Total Return Bond Fund. He said the central bank is making a big mistake with its plans to taper quantitative easing.

Jeffrey Gundlach Says Fed Is Making A Big Mistake

Jeffrey Gundlach expects 10-year bond yields to rise further

In May, Jeffrey Gundlach said that the quantitative easing will last forever. Yesterday, Gundlach said that he expected the Fed to keep buying bonds until targeted yields were achieved. Bond management experts including Jeffrey Gundlach and Bill Gross have witnessed a decline in their funds after Ben Bernanke said that the Federal Reserve could start pulling back its stimulus program by the end of this year. Speculations of an early tapering have pushed bond yields higher and prices lower. That caused clients to withdraw their money from funds.

In June, Gundlach said he expects bond prices to recover. But they continue to fall. Meanwhile, 10-year bond yields have spiked 1.33% since May to 2.96%, according to Alexis Leondis of Bloomberg. Now Jeffrey Gundlach expects 10-year Treasury yields to increase to 3.1%. He said, in any case, bond yields are unlikely to fall below 2.7% anytime soon.

Jeffrey Gundlach on the next financial crisis

Talking about the possibility of a potential global economic crisis, Jeffrey Gundlach backed the views of Bridgewater Associates founder Ray Dalio. A few days ago, Dalio said that emerging market countries are most likely to trigger the next financial crisis. And India could be the first victim. India relies too much on foreign capital to finance its budget deficit.

Gundlach says India could face a financial crisis because funds that hold Indian assets have seen heavy capital outflows. Foreign investors are pulling out of Indian markets as bond yields have risen amid expectations that the Fed would announce a stimulus pullback at its September 17-18 policy meeting. Jeffrey Gundlach said China and Russia are comparatively in a better state than India.

Investors have pulled out more than $2.9 billion from his DoubleLine Total Return Bond Fund over the past three months.

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