Mounting Treasury Stress Could Force the Fed Back to the Printing Press
A bond sell-off that continues to push long-term U.S. Treasury yields higher may soon leave the Federal Reserve with only one tool left in the kit: turn the presses back on.
Speaking at Bloomberg’s Credit Forum, DoubleLine Capital chief and veteran fixed-income watcher Jeffrey Gundlach argued that investors have little appetite for maturities beyond a few years.
Evidence is everywhere, he said—from Warren Buffett’s multi-billion-dollar hoard of T-bills to tepid demand at recent 30-year auctions. If that indifference drives the 10-year yield to roughly 6 percent, Gundlach expects the central bank to revive quantitative easing (QE) and start buying long bonds outright.
“Pair a six-handle yield with trillion-dollar monthly deficits and a recession, and the Fed’s hand will be forced,” he told the audience.
The strategy would echo the 2020 pandemic playbook, when a surprise pledge to purchase corporate debt jolted credit markets from a 20-point slump back to par in days. A similar QE announcement focused on Treasuries, Gundlach predicted, could deliver an equally violent snap-back—rewarding anyone nimble enough to load up on duration just before the pivot.
Whether the Fed likes it or not, he concluded, a shrinking buyer base at the long end is turning the idea of “higher for longer” into a self-defeating loop. Once the yield pain crosses Gundlach’s 6 percent line, the next move may be a familiar one: fabricate demand with freshly created dollars and hope the rally buys time.
Kosta Gushterov
Reporter at Coindoo
Kosta joined the team in 2021 and quickly established himself with his thirst for knowledge, incredible dedication, and analytical thinking. He not only covers a wide range of current topics, but also writes excellent reviews, PR articles, and educational materials. His articles are also quoted by other news agencies.
