Billionaire Jeffrey Gundlach says he’s seeing a shocking turn of events as investors are now treating select corporate debt as more secure than US government bonds.
In a new discussion with Barclays CEO C.S. Venkatakrishnan, the DoubleLine Capital CEO says credit markets are repeating a dynamic last seen in the early 1980s, when IBM’s bonds briefly yielded less than Treasuries — a sign of higher perceived safety.
“The spreads on investment grade corporate bonds are basically at the tightest of all time, other than back in the early 80s… when we had a shocking development that IBM bonds traded through treasuries. Well, that’s happening now again. Microsoft is trading through Treasuries.”
In 1981, the U.S. 10-year Treasury yield surged to roughly 15.8%, the highest level in modern history, as the Federal Reserve under Paul Volcker hiked rates aggressively to crush runaway inflation.
But this time around, Gundlach says Microsoft appears to offer a safer investment option than US Treasuries because of its superior balance-sheet discipline versus the US government’s rapid debt buildup and short-term funding bias.
“I think that’s not random. I think that’s because people realize that the corporate public market doesn’t face a maturity wall. The CFOs did a much better job than the US government in managing their debt burden.”
Gundlach points to the Treasury Department’s heavy reliance on short-term bonds during the low-rate era, noting the federal government failed to lock in cheap funding for the long haul.
“When rates were low, we were running 84% T-bill issuance. You should be locking in lower rates for longer.”
By contrast, large corporations extended maturities and fortified balance sheets, a dynamic now highlighted as mega-cap technology firms tap bond markets to fund the artificial intelligence buildout. US companies have issued roughly $200 billion in bonds so far this year, led by Meta, Alphabet and Oracle.
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