Bond Markets Recovering Nicely Says Gundlach

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.