Gundlach sees markets on 'collision course' with higher rates

September 18, 2026 at 08:33 PM1 min

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Jeff Gundlach warned Thursday that higher interest rates risk triggering a recession and a wave of corporate defaults. The DoubleLine Capital CIO said long-dated Treasury yields could rise past 6%, forcing a larger US Treasury intervention. His warning comes as the 10-year Treasury yield recently surpassed 5%.

Key Facts

Gundlach said long-dated bond yields could rise past 6%, prompting a larger US Treasury intervention.
The 10-year US Treasury yield recently surpassed 5%, a psychological level reflecting investor anxiety over oil prices and inflation.
The US Treasury announced $6 billion in long-dated bond buybacks, but yields jumped on the announcement day.
Gundlach warned that higher rates could trigger a wave of defaults, especially in the AI trade and private credit sectors.

Rate Outlook

Gundlach said rates have the potential to go 'much, much higher' from current levels. He outlined a scenario in which long-dated bond yields rise past 6%, leading the US Treasury to step in with an even bigger intervention to quell volatility. The Treasury recently announced $6 billion worth of long-dated bond buybacks, but yields jumped on the day it was announced. Gundlach said yields will likely keep inching up, pointing to upside risks to inflation and oil prices.

Market Vulnerabilities

Gundlach said higher rates will cause 'something big' to unfold in markets, pointing to how higher borrowing costs could interact with vulnerabilities in the AI trade and the private credit sector. He warned that defaults are going to start coming in 'fast and furious'. The 10-year US Treasury yield recently surpassed the key 5% mark, a psychological level suggesting investors are anxious about higher oil prices and the impact on inflation. Gundlach said countries will soon need to replenish oil reserves, which have been drawn on heavily amid the Iran war, potentially stoking more price growth.