Jeffrey Gundlach, CEO of DoubleLine Capital, said the US Treasury market is signaling that the Federal Reserve will need to do more than talk tough to achieve its 2% inflation target. The Fed held its benchmark interest rate unchanged in a range of 3.5% to 3.75%, with three policy members dissenting in favor of a quarter-point rate hike. The 10-year Treasury yield rose more than 7 basis points to 4.681%, while the 30-year bond yield surged to 5.213%, its highest level since 2007, driven by inflation and deficit concerns. Meanwhile, the policy-sensitive 2-year Treasury yield fell 3 basis points to 4.244%, reflecting investor skepticism about the Fed’s willingness to follow through on its hawkish rhetoric.
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