With the rate on the 10 year Treasury up around 50 basis points over the last month, many prominent bond investors (including PIMCO’s Bill Gross) have called an end to the decades long bond bull market. Judging by his presentation earlier this week entitled “What in the World is Going on?” bond guru Jeff Gundlach may not agree. Here are 3 reasons he thinks interest rates aren’t headed much higher from here.
Reason #1: Global Growth is Slowing
Bond rates generally rise when growth is rising, causing inflation expectations to pick up and investors to demand a higher rate of return to compensate. In slide 9 of his presentation, which you can see below, Mr. Gundlach shows that in fact the opposite is happening. After the initial uptick after the financial crisis, global GDP growth has been in a steady downward trend.
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