In his conversation with Wapner, Gundlach called the end of the liquidation cycle that started last week following the Fed Chairman Ben Bernanke’s comments. Here’s Gundlach:
The liquidation cycle appears to have run its course with emerging market bonds, U.S. junk bonds, munis, and MBS [mortgage backed securities] — all of which substantially underperformed Treasuries during the rate rise — now recovering sharply. … The 200-basis point yield rise on certain sectors brought absolute yields up to levels high enough to create a compelling value proposition. Not surprisingly, investors have been drawn to these values leading to interest rate stabilization.
And Gundlach’s money quote: “July will not be a repeat of May/June in the interest rate market.”
Whether that means that mortgage loan rates will merely stabilize or fall back left as an exercise for the reader.
The yield on 10-year Treasuries has come down 3 basis points today, after rising by 11 basis points in the previous week and 37 basis points in the last month.
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