Gundlach: US 10-year Treasury yield above 3% will harm stocks, housing

Jeffrey Gundlach
Heidi Gutman | CNBC

A U.S. 10-year Treasury note yield above 3 percent will harm the stock-market rally and housing market, said Jeffrey Gundlach, chief executive of DoubleLine Capital, on Tuesday.

"I think above 3 percent is a problem," Gundlach told Reuters. "If the 10-year goes above 3 percent, you would also have to say unequivocally you have seen the end of the bond bull market."

On an investor webcast late Tuesday, Gundlach reiterated that U.S. President-elect Donald Trump's administration will be "bond unfriendly" and investors should brace for a 6 percent 10-year Treasury yield within four to five years.

Gundlach, known on Wall Street as the "Bond King," went "maximum negative" on Treasuries on July 6 when the yield on the benchmark 10-year Treasury note hit 1.32 percent. Tuesday, the yield on the 10-year Treasury note closed around 2.47 percent.

Gundlach said it is reasonable to be nimble and do some purchasing of Treasurys "I think it is an okay buy right now," he said. "We hate the market less. We are a little bit less defensive," Gundlach said.

When bond prices are down, DoubleLine likes it more, he said.

If the 10-year yield exceeds 3 percent next year, high-yield "junk" bonds will drop into a "black hole of illiquidity," Gundlach said.

Gundlach said the Standard & Poor's 500 Index, which is up 6.5 percent since the election, could reverse their solid momentum at the latest by Trump's Jan. 20 inauguration. Gundlach said he thinks the dollar is going to soften in the weeks ahead as "bullishness in the dollar is pretty entrenched."