DoubleLine Capital CEO Jeffrey Gundlach said he has shifted some portfolios,
including the firm’s flagship fund, from higher-coupon US Treasuries into
lower-coupon bonds of the same maturity to hedge against a possible future
restructuring of US debt. In an interview, Gundlach said the US government could
theoretically reduce coupon payments on outstanding debt during a future
recession to lower interest costs, citing a hypothetical cut to 1% from 4%
without changing maturities. He called the scenario a “longshot” but warned such
a move would cause bond prices to collapse and severely damage US borrowing
credibility. Gundlach linked the idea to Treasury Secretary Scott Bessent’s
discussions about managing the yield curve to address the US debt burden.
