Jeffrey Gundlach, chief executive of DoubleLine Capital and a well-known bond fund manager, said on a live investor webcast Tuesday that if U.S. government bond prices soared, investors would "flock" to fill a large number of speculative short positions.
Hedge funds and other big speculators have been increasing short positions in U.S. 10-year bond futures and ultra-long-term bond futures, setting record levels of net short positions.
Gondlak said that if U.S. Treasury yields fall, speculators'unilateral bets could lead to a "massive short run". He also said, "the speculative short positions in the US Treasury market are too high."
"If there's a catalyst that starts the bond price rise and the 10-year yield fall, you can imagine people scrambling to fill their short positions," Gondlak said.
"If this happens, the yield may fall to 2.25%. Of course, here is the long-term debt. I suspect that the short-term yields may rise, and the yield curve will hang upside down.
Gunder Lark also said that the global economic growth is slowing down, and the next sharp fluctuation of the US dollar will be downward. He compared the U.S. budget deficit financed by borrowing to Miracle-Gro fertilizer, and pointed out that tax cuts caused the deficit to swell and that the benefits were not permanent.

<>Gunder Lark, a well-known investor, warned of soaring U.S. debt.

 

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