DoubleLine Capital · Oct 6, 2026 · 40m · 24m saved
With Jeffrey Gundlach, Founder, CEO and CIO of DoubleLine Capital
The US deficit runs at about 6% of GDP while the economy is growing, Jeffrey Gundlach said. In a recession he expects it to very likely reach 12%, something like $3.6 trillion a year, more than half of today's tax receipts.
Many bond investors call 5% on Treasuries a buying opportunity. He would not buy long-term Treasuries until the yield reaches about 6%, and he expects the Fed to raise rates while it fights both inflation and its own interest bill.
"You push on one spot and it's just going to get a bump on the other spot."
Jeffrey Gundlach, Founder, CEO and CIO of DoubleLine Capital, on UBS's annual back-to-school markets conversation, said six years ago that 2020 marked the long-term bottom in interest rates. Rates have since risen 500 basis points. The interview was recorded in late September, the day after the 10-year Treasury yield jumped almost 17 basis points to its highest level since 2007.
The full interview is covered here so you can skip it. 40 minutes of video, 16 minutes of reading.
Here are the 16 predictions that matter.
Key Takeaways
AI company bonds have widened sharply while other corporate bonds sit near their tightest spreads
SpaceX's triple-B-minus bonds, he said, trade like a single-B credit
A Shiller CAPE ratio of 42 has historically meant negative real returns from the S&P 500 over the next 10 years
The Fed will probably raise rates a couple more times, in December and possibly October
He would not buy long-term Treasuries below about 6%, maybe 6.5% on the 30-year
5% is not a high interest rate, and the zero-rate era was the abnormal one
Costco doubled the price of its motor oil and rationed it, the kind of move that leads consumers to hoard
The Treasury's $6B of buybacks equals about a day of the deficit
In the next recession the deficit could reach 12% of GDP, and he expects the dollar to fall at least 20%
The Fed's real dual mandate is now inflation and interest expense, and easing one worsens the other
He thinks the market is past peak AI, and a drop in AI capital spending brings the next recession
1. A Global Bond Selloff
The host opened with the previous day's move: the 10-year yield up almost 17 basis points to its highest since 2007, the 5-year above 5% for the first time since 2007, and the 30-year near its 2004 high.
Gundlach said yields are rising everywhere in the developed world except Switzerland
"Even in Japan, I think we're getting above 3%." — Jeffrey Gundlach
Japan's yields were thought to be under tight control, he said, but weakness in the yen changed policy.
"One of the things that's really driving all of this is just the supply of bonds." — Jeffrey Gundlach
The budget deficit keeps growing with no end in sight. He mentioned plans for two more military bases in Greenland, and recalled that the Bagram base the US gave up in Afghanistan cost something like $300 billion. On top of government borrowing, he has seen estimates of $900 billion or $1.4 trillion of AI and AI-related bond issuance over the coming several months.
