‘Bond King’ Jeffrey Gundlach Forecasts Flood of Money Printing From Federal Reserve in Push To Keep Long Term Treasuries Afloat

Billionaire Jeffrey Gundlach believes the Federal Reserve will most likely be forced to print money to support the U.S. Treasury market.

In a new interview at the Bloomberg Credit Forum, the DoubleLine Capital founder says the Fed will likely need to counter a lack of demand for the long end of US Treasuries in the form of quantitative easing (QE).

QE is when a central bank buys assets, typically government bonds, to inject money into the economy, aiming to boost money supply and reduce long-term interest rates.

Many investors have flocked to short term bonds this cycle, with Warren Buffett’s Berkshire Hathaway reportedly owning at least 5 of the short-term T-bill market.

With a lack of demand hurting long-term Treasuries and boosting yields up to painful levels, Gundlach says the Fed will most likely respond with a similar reaction to the Covid-induced money printing campaign of 2020.

He says that once yields get up to around 6, a money printing agenda will come to the forefront.

“There will come a moment where you have to pivot because there’s going to be a response. And I’ve got many ideas of what that response might be, but one of the leading candidates would be quantitative easing. So you get to a point where the rate is so uncomfortably high – what is that number? I’m going to guess 6 – where they say ‘this is going to be something where we’re going to be running a $5 trillion budget deficit with all this bond issuance when we go into a recession.

And so they’ll pivot – I believe this is a sensible idea, there’s other ideas too – but the leading candidate is they will announce quantitative easing on buying long term treasuries, and when they do, you have to, very quickly – and hopefully you do it the day before they announce it [because] we don’t have access to the day before stuff, that’s for the primary broker dealers.

But you would need to buy long-term treasuries as much as you possibly could.

Because when that gets announced, it’ll be just like when they announced buying corporate bonds in Covid, where all of a sudden the corporate bond market went from being down 20 points to right back to where it started in just a matter of a few days you coud get a 20 point rally on the long bond if they announce they’re buying the long bond.”