Jeff Gundlach: A Survey of the US Capital Markets
Robert Huebscher
January 27, 2009
January 27, 2009
- Fixed Rate CMBS – Spreads are now at record levels, 11% over Treasury bonds. But the downturn in the commercial real estate market will come after that of the residential market. Gundlach said that CMBS are “a long way from turning positive,” and that fundamentals will not improve in 2009. He does not recommend this sector, nor does he recommend floating rate CMBS.
- Investment Grade Corporate Bonds – Prior to 2008, spreads on investment grade corporate debt ranged between 100 and 200 basis points over Treasury bonds. Many investors did well buying corporates when spreads went over 200 basis points and selling under 100 basis points. That relationship ended in 2008, as spreads widened, ultimately reaching nearly 700 basis points in November. They have contracted slightly since then, but Gundlach believes this sector is still cheap — albeit not as cheap as non-agency bonds (discussed below). TCW owns this sector in a number of its funds.
- High Yield Corporate Bonds – Spreads on these bonds have moved in tandem with investment grade corporate bond spreads, widening to a record level of nearly 20% in November of 2008 and then contracting to a current level of approximately 17%. Gundlach said this sector was attractive at a “tactical but not structural” level, meaning that he would take advantage of trading opportunities but would not recommend strategic asset allocation to this se ctor.
Display article as PDF for printing.
Would you like to send this article to a friend?
Remember, if you have a question or comment, send it to .
