In a Reuters piece, bond god Jeff Gundlach weighs in on the latest interest rates surge.Veteran bond investor Jeffrey Gundlach, who runs $30 billion at DoubleLine Capital in Los Angeles, said yields could rise further but the 10-year yield would have trouble holding much above 3 per cent because that level would hurt the economy. “
Now that Treasuries have broken out to higher yields after six months of mind-numbingly low volatility, it is logical to expect the move to higher rates to last more than one week,” Gundlach said. “The way things look today I think a move toward 3.25 per cent would weaken the economy noticeably.”
3.25% is still a ways away, but it’s an interesting question whether at that level economic activity would start to slow down
One theory that people have held is that a climb in rates might actually encourage some activity, such as housing, if people started to feel that the era of low rates was coming to an end, and that now was the last change they’d get to lock in cheap rates. We might get to put that to the test soon.