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Short-term interest rates definitely staying low: Gundlach

Lawrence Lewitinn
Talking Numbers
Short-term interest rates definitely staying low: Gundlach

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.

(Read: Goldman sees budget crisis fear as good news)

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."

(Watch: US credibility continues to erode: Gundlach)

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.

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