NEW YORK (Reuters) – Jeffrey Gundlach, chief executive and chief investment officer of DoubleLine Capital LP, said on a company webcast on Tuesday that he favored dollar-denominated emerging market bonds over U.S. high-yield bonds.
Gundlach said that U.S. high-yield junk bonds were at their “most overvalued” in history relative to emerging markets, and that dollar-denominated emerging market debt was superior relative to high-yield U.S. corporate debt.
“I just don’t think that it’s a good idea to be favoring high yield bonds in the U.S. today versus dollar-denominated emerging market bonds,” Gundlach said.
The Barclays U.S. Corporate High Yield index is up 7 percent this year. The Barclays Emerging Market U.S. Dollar Total Return Index, meanwhile, is down about 4.6 percent for the year, according to Lipper.
Gundlach also said that the U.S. Federal Reserve’s easy money policies are likely to continue for longer than expected, since Fed Vice Chair Janet Yellen will maintain an accommodative stance once she succeeds Ben Bernanke as Fed Chairman.
“(Quantitative easing) is going to last longer, and meddling with the economy is going to remain with us longer now that Ms. Yellen is taking over at the Fed than people think,” Gundlach said.
The Fed is currently buying $85 billion in Treasuries and agency mortgages monthly in an effort to spur hiring and lower long-term borrowing costs.
Gundlach’s flagship DoubleLine Total Return Bond Fund fell 0.22 percent in November, beating 57 percent of peers, data from investment research firm Morningstar show. For the year, the fund is up 0.44 percent, beating 90 percent of peers, Morningstar data show.
The Los Angeles-based DoubleLine had $53 billion in assets as of September 30.
(Reporting by Sam Forgione; Editing by Bernard Orr)