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“Crazily Low” Bund Yields Spike Most In 3 Months, Gundlach Warns Of “Massive Risk At These Levels”

In a curious case of 2015 deja vu, DoubleLine founder Jeffrey Gundlach says German bond yields are "crazily low," and expects them to rocket higher and rattle the US Treasury market when (if) the ECB scales back its bond purchases.

 

The FT reports that Gundlach warns the 10-year German Bund yield would jump to 1 per cent “pretty quickly”, from about 0.4 per cent today.

So far he has been right, just as in 2015 when Gundlach and Gross warned that Bunds were "the short of a lifetime."

 

And of course, as goes Bund yields, so goes UST yields…

“That would be a catalyst for US interest rates rising as well, as we’re all tied together these days. So we’re watching this pretty closely,” Gundlach said.

 

“You have massive risk at these levels.”

 

“I just don’t like 10-year Treasuries at this level, they don’t have any business being down here.”

Gundlach concluded ominously:

“I’m starting to come to the conclusion . . . that maybe we have to go on trouble-watch in the middle of 2018.”

For now, Gundlach's favorite bond indicator is pulling back…

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