Jeff Gundlach of DoubleLine says interest rates will be staying low for a long while. Is the Bond King right?
The US Treasury's 10-year bond rallied Thursday as Congress and the President reached an agreement to keep the government opened for business a little longer.
Yields on the 10-year closed below 2.6%, nearly 7 basis points down and investors buy US Treasury bonds with renewed confidence the government will pay their bills in the short run. Bond yields move inversely from bond prices; as bonds get bid up, yields go down.
With a debt crisis averted – for the time being, at least – and with the Federal Reserve Bank expected to continue its $85 billion per month bond-buying program without a taper any time soon, interest rates will remain low for some time to come. That's what Jeffrey Gundlach, CEO and CIO of DoubleLine, said Thursday on CNBC:
"One thing we know for sure as much we've ever known anything is that short-term interest rates are going to stay low for as far as the eye can see. I mean, first, we have to deal with quantitative easing. As long as there is a dollar of quantitative easing, short term interest rates, in my opinion are not going to go up. So, quantitative easing is not even going away."
Andrew Busch, founder and editor of The Busch Update, agrees with Gundlach that quantitative easing and the Fed's future leadership are behind the bond's recent bull run.
"Bernanke told us [the Fed was] going to taper in September and they pulled away from that," says Busch. "The nomination of Janet Yellen to take over his job has further fueled buying of the 10-year."
Steven Pytlar, Chief Equity Strategist at Prime Executions, says the charts are pointing to higher bond prices – and lower interest rates.
So, how much lower can bond yields go? Watch the video above to see Busch and Pytlar analyze what's next for bonds.
More from Talking Numbers: