Jeffrey Gundlach, CEO of DoubleLine Capital, said the bond market has become far more attractive than stocks, allowing investors to earn an 8% annual return. The so-called Bond king said in an interview on CNBC’s Closing Bell: Overtime that Treasuries are now “potentially a profit-maker.” He added that his copper-to-gold indicator suggests the benchmark 10-year Treasury yield is overvalued by 200 basis points, meaning the price has room to move higher. Bond yields move inversely with their prices. Buying safer government bonds allows investors to buy riskier, more opportunistic credit in the market, Gundlach said. Spreads on non-government bonds have widened, including guaranteed mortgages, junk bond yields, emerging market debt and asset back securities, he added. With 10-year government bonds yielding around 4% and riskier credits yielding around 12%, Gundlach says investors could build a bond portfolio with a yield of 8%, and the strategy also has a natural hedge. “If credit does bad, Treasuries will do well. And if Treasuries just lag, the loan is likely to have a pretty good year next year,” Gundlach said. “So this is a pretty good opportunity. It’s much, much more attractive than stocks.”
