Jeffrey Gundlach Warns Next US Recession Could Trigger Debt Crisis

Chief executive of DoubleLine Capital Jeffrey Gundlach warned that the next United States economic downturn could trigger a fiscal debt crisis. He argues that such a scenario would cause long-term Treasury yields to rise sharply, which contradicts the traditional view of bonds serving as safe havens during periods of economic strife.

Gundlach suggests that a fiscal crisis might force the Federal Reserve System and the United States Department of the Treasury to implement unconventional policies. These measures could include debt restructuring or a repeat of Operation Twist, a strategy where the central bank purchases long-dated bonds to manage interest rates.

To protect funds from potential interest rate increases, DoubleLine Capital is currently prioritizing low-duration assets. This shift in strategy aims to shield the firm's investments from the volatility Gundlach anticipates during a potential debt-driven recession.